The five major Australian banks have shown resilience in the face of a global credit squeeze and reported combined cash earnings growth of 14.7 per cent in fiscal 2007, an industry survey found.
The PricewaterhouseCoopers (PwC) survey also predicts the major banks' underlying cash earnings will grow 11.2 per cent in the current financial year.
The study comes just hours after the last of the big Australian banks, National Australia Bank, reported a 4.2 per cent rise in net profit to $4.6 billion.
Mike Codling, PwC's banking and capital markets leader, said the big banks had side stepped the credit crunch.
"They haven't been exposed to any direct credit losses and because of their diverse funding base they haven't suffered much from the liquidity squeeze," he said.
In fact the major banks had worked themselves into a "sweet spot" by absorbing additional funding costs and keeping variable home loan interest rates on hold to win market share from smaller banks and non-banks, he said.
The major banks had also benefited from an uptick in deposits in a flight to quality, the PwC study concluded.
Recent volatility has seen investors fleeing equity markets, opting instead for the certainty and security of savings accounts with the larger banks, it said.
Mr Codling said the main driver of the banks' results in fiscal 2007 was the growth in lending volumes.
"Business lending has been a stand-out on the back of a very strong economy, with system growth at 23 per cent which we haven't seen for almost 20 years," he said.
Volume growth was partly offset by continuing margin compression, which was down by 10 basis points across the major banks.
Mr Codling said the continued decline in interest margins was largely due to the intense competition.
"But in the last few months the credit crunch has undoubtedly impacted the margins by driving up the cost of wholesale funding," he said.
However Mr Codling warned the credit environment was likely to turn down over the current year after a long benign period.
After rising interest rates and costs were weighed against full employment and a strong economy, it seemed likely credit losses would increase, he said.
"However they are coming off a very low base and what we'll likely see is a return towards more normal long-run averages.
"There are plenty of threats but there are also plenty of opportunities. I'd back the banks to have another strong year."
Source: AAP
Sunday, November 11, 2007
Sunday, October 28, 2007
RAMS sale to Westpac Bank fair value
RAMS Home Loans Group Ltd has received independent expert approval for the fire sale of its franchise network, but its existing mortgage book remains in deep trouble.
The beleaguered non-bank lender has also revealed that its founder and chairman John Kinghorn, who made $650 million when RAMS listed earlier this year, was paid $80,000 in 2006/07.
Chief executive Greg Kolivos received a total remuneration of $625,000, which included a $200,000 cash bonus.
Westpac Banking Corporation Ltd's $140 million offer for RAMS' 92 branches, brand name, and all the future business it writes, was fair-value and in RAMS' best interests "given its current circumstances", a report by Deloitte Corporate Finance said.
As a further sweetener, Westpac on October 2 also agreed to provide RAMS with $1.5 billion to fund its existing mortgage book, which Westpac decided not to buy.
RAMS ran into trouble in August when the global liquidity freeze cut off more than $6 billion of funding that it sourced from the US extendable commercial paper (XCP) market.
Deloitte has valued RAMS' $14.6 billion loan book at between $213.7 million and $272.9 million, assuming RAMS can refinance its XCP programs.
This represents a value of between 60 and 70 cents per share.
But if RAMS can't refinance the programs, Deloitte has valued the book between $124 million and $152.6 million, representing a per share value between 35 cents and 43 cents.
RAMS shares closed one cent higher at 32.5 cents. They were offered in May at $2.50 each.
The firm confirmed that the $1.5 billion in funding from Westpac was conditional on RAMS forming a syndicate of lenders.
It also accepted it might not be able to find them by the time its XCP programs expire in February.
If it can't, RAMS said it will lose "all, or substantially all" of the economic benefit of the $6 billion plus worth of loans funded by the XCP programs.
As a double whammy, RAMS will also be obliged to pay trailing commission to brokers on those loans.
RAMS said it would be "optimistic" to believe that it could fund its loan book in residential mortgage-backed securities (RMBS) markets instead.
It also accepted that funding costs will be higher going forward, adding that XCP and RMBS market were still very hostile.
In its explanatory memorandum to shareholders, RAMS also revealed that it had tried all sort of ways to fund its mortgage book.
Market soundings for RMBS issues in the US and Europe fell on deaf ears.
Earlier this month, RAMS priced a $300 million RMBS issue in Australia, but it revealed the issue was planned at $1 billion.
RAMS also considered tendering the sale of all or parts of its business, but said such a move was "not deemed practicable in the circumstances and short time available".
Mr Kinghorn's $80,000 pay packet last financial year was the same as his pay a year prior.
Mr Kolivos was paid $570,000 in 2005/06 compared to his most recent pay packet of $625,000.
For 2006/07, RAMS booked a 49 per cent increase in net profit to $43.5 million.
RAMS shareholders will vote on Westpac's offer at the non-bank lender's annual general meeting on November 26.
Westpac, meanwhile, said it was happy with Deloitte's valuation of the franchise business of between $35.6 million to $167.5 million.
"I believe Westpac is well positioned to deliver a positive future for RAMS franchisees and employees," chief executive David Morgan said.
Source:AAP 2007
The beleaguered non-bank lender has also revealed that its founder and chairman John Kinghorn, who made $650 million when RAMS listed earlier this year, was paid $80,000 in 2006/07.
Chief executive Greg Kolivos received a total remuneration of $625,000, which included a $200,000 cash bonus.
Westpac Banking Corporation Ltd's $140 million offer for RAMS' 92 branches, brand name, and all the future business it writes, was fair-value and in RAMS' best interests "given its current circumstances", a report by Deloitte Corporate Finance said.
As a further sweetener, Westpac on October 2 also agreed to provide RAMS with $1.5 billion to fund its existing mortgage book, which Westpac decided not to buy.
RAMS ran into trouble in August when the global liquidity freeze cut off more than $6 billion of funding that it sourced from the US extendable commercial paper (XCP) market.
Deloitte has valued RAMS' $14.6 billion loan book at between $213.7 million and $272.9 million, assuming RAMS can refinance its XCP programs.
This represents a value of between 60 and 70 cents per share.
But if RAMS can't refinance the programs, Deloitte has valued the book between $124 million and $152.6 million, representing a per share value between 35 cents and 43 cents.
RAMS shares closed one cent higher at 32.5 cents. They were offered in May at $2.50 each.
The firm confirmed that the $1.5 billion in funding from Westpac was conditional on RAMS forming a syndicate of lenders.
It also accepted it might not be able to find them by the time its XCP programs expire in February.
If it can't, RAMS said it will lose "all, or substantially all" of the economic benefit of the $6 billion plus worth of loans funded by the XCP programs.
As a double whammy, RAMS will also be obliged to pay trailing commission to brokers on those loans.
RAMS said it would be "optimistic" to believe that it could fund its loan book in residential mortgage-backed securities (RMBS) markets instead.
It also accepted that funding costs will be higher going forward, adding that XCP and RMBS market were still very hostile.
In its explanatory memorandum to shareholders, RAMS also revealed that it had tried all sort of ways to fund its mortgage book.
Market soundings for RMBS issues in the US and Europe fell on deaf ears.
Earlier this month, RAMS priced a $300 million RMBS issue in Australia, but it revealed the issue was planned at $1 billion.
RAMS also considered tendering the sale of all or parts of its business, but said such a move was "not deemed practicable in the circumstances and short time available".
Mr Kinghorn's $80,000 pay packet last financial year was the same as his pay a year prior.
Mr Kolivos was paid $570,000 in 2005/06 compared to his most recent pay packet of $625,000.
For 2006/07, RAMS booked a 49 per cent increase in net profit to $43.5 million.
RAMS shareholders will vote on Westpac's offer at the non-bank lender's annual general meeting on November 26.
Westpac, meanwhile, said it was happy with Deloitte's valuation of the franchise business of between $35.6 million to $167.5 million.
"I believe Westpac is well positioned to deliver a positive future for RAMS franchisees and employees," chief executive David Morgan said.
Source:AAP 2007
Tuesday, October 23, 2007
Analysts say any interest rate rise would stifle a much-needed recovery in housing investment
All eyes will be on the Consumer Price Index (CPI) for the September quarter.
Any inflation spike could force the Reserve Bank of Australia's hand when the Board meets on Melbourne Cup day.
Meanwhile, the housing shortage brought on by a surge in migration is being cited as a major contributor to the official inflation result.
Economic forecaster BIS Shrapnel says any interest rate rise would stifle a much-needed recovery in housing investment.
BIS Shrapnel economist Jason Anderson says clearly not enough is being produced in terms of the rate of dwelling construction.
"There is a need now to articulate how governments are going to respond to an environment really which has changed very quickly in terms of that overseas migration and the population gain," he said.
"But it's now becoming much more important in terms of the outlook for inflation and we can't set aside yet as the temporary phenomenon.
"This is an issue that will be with us into the next couple of years at least."
Rental shortage
He says the rental shortage will continue to attract a lot more attention in the determination of the inflation number for some time.
"The real problem then is that any policy action to remedy or try and address the imbalance between supply and demand, will take quite sometime to come through, and in the meantime, there will certainly be an acceleration in rentals," he said.
"With that in mind, it's a difficult balancing act, I think, for the Reserve Bank, because it's contributing to acceleration in consumer prices, but on the other hand, any policy action will probably dampen still, the rate of dwelling construction and that of course then has feedbacks in terms of extending the imbalance between supply and demand."
He says depending on Wednesday's CPI result, the Reserve Bank decision is going to be very evenly balanced.
"I think there is a need to look at, obviously, the wider context in terms of consumer spending," he said.
"We have seen a reacceleration in terms of how spending growth.
"The housing market conditions, with the exception of Sydney, seem to have had life, new life breathed into them over the last six months and that would indicate that the impact of the rate rises that we had last year, obviously the evidence is yet to come through in terms of the August rise, have not been that substantial.
"So also when you add to that, the fact that the employment growth figures remain solid means that it's going to be quite a difficult decision."
Any inflation spike could force the Reserve Bank of Australia's hand when the Board meets on Melbourne Cup day.
Meanwhile, the housing shortage brought on by a surge in migration is being cited as a major contributor to the official inflation result.
Economic forecaster BIS Shrapnel says any interest rate rise would stifle a much-needed recovery in housing investment.
BIS Shrapnel economist Jason Anderson says clearly not enough is being produced in terms of the rate of dwelling construction.
"There is a need now to articulate how governments are going to respond to an environment really which has changed very quickly in terms of that overseas migration and the population gain," he said.
"But it's now becoming much more important in terms of the outlook for inflation and we can't set aside yet as the temporary phenomenon.
"This is an issue that will be with us into the next couple of years at least."
Rental shortage
He says the rental shortage will continue to attract a lot more attention in the determination of the inflation number for some time.
"The real problem then is that any policy action to remedy or try and address the imbalance between supply and demand, will take quite sometime to come through, and in the meantime, there will certainly be an acceleration in rentals," he said.
"With that in mind, it's a difficult balancing act, I think, for the Reserve Bank, because it's contributing to acceleration in consumer prices, but on the other hand, any policy action will probably dampen still, the rate of dwelling construction and that of course then has feedbacks in terms of extending the imbalance between supply and demand."
He says depending on Wednesday's CPI result, the Reserve Bank decision is going to be very evenly balanced.
"I think there is a need to look at, obviously, the wider context in terms of consumer spending," he said.
"We have seen a reacceleration in terms of how spending growth.
"The housing market conditions, with the exception of Sydney, seem to have had life, new life breathed into them over the last six months and that would indicate that the impact of the rate rises that we had last year, obviously the evidence is yet to come through in terms of the August rise, have not been that substantial.
"So also when you add to that, the fact that the employment growth figures remain solid means that it's going to be quite a difficult decision."
Thursday, October 18, 2007
Mortgage credit fears bite in Queensland
Queensland real estate market changed personality last month, as buying a home becomes a more frightening issue for many Queenslanders.
That has led to an almost 21 per cent slump in the number of mortgages issued by Australian Finance Group, which holds about 13 per cent of the market.
It was the biggest slump so far recorded by AFG at a time when the market should be picking up.
Property analyst Michael Matusik now believes investors are the cause but he also believes share houses are about to get a lot more cramped as rents rise and people look to reduce the financial burden by bringing in boarders.
But he also thinks the capital gains of 15 per cent a year in some parts of Brisbane are at an end with probably half that expected for the present year.
Rising interest rates combined with the fallout from the US housing market and bad credit is creating nervousness, and with affordability already at historic lows it doesn't take much to change minds.
"We will see stop-start growth over the next 12 to 18 months as the world tries to figure out how it's going to cope with credit," Mr Matusik said.
He said investors were now finding it tough to get loans for 100 per cent or more of a property's value and that could mean dipping into their own pockets for things like stamp duty. Statistics also showed that many rental homes had one or more spare bedrooms and that was going to end.
"In the next 12 months renters will be forced to share. Spare rooms will disappear and then we will see another kick in the housing market," he said.
AFG's Mark Hewitt said fixed loans had also increased from 18 per cent in August to 20 per cent last month. He said last month's decline in mortgage sales was about double the normal September slump as concerns persisted over the global debt markets and the US subprime difficulties.
"On the positive side, we believe that the underlying market is very strong and these figures represent a blip rather than a change in direction," he said.
He added that this month had shown early indications of a small recovery.
In Queensland the average mortgage has gone up by 12 per cent in the past nine months to $318,000.Source: Courier Mail
That has led to an almost 21 per cent slump in the number of mortgages issued by Australian Finance Group, which holds about 13 per cent of the market.
It was the biggest slump so far recorded by AFG at a time when the market should be picking up.
Property analyst Michael Matusik now believes investors are the cause but he also believes share houses are about to get a lot more cramped as rents rise and people look to reduce the financial burden by bringing in boarders.
But he also thinks the capital gains of 15 per cent a year in some parts of Brisbane are at an end with probably half that expected for the present year.
Rising interest rates combined with the fallout from the US housing market and bad credit is creating nervousness, and with affordability already at historic lows it doesn't take much to change minds.
"We will see stop-start growth over the next 12 to 18 months as the world tries to figure out how it's going to cope with credit," Mr Matusik said.
He said investors were now finding it tough to get loans for 100 per cent or more of a property's value and that could mean dipping into their own pockets for things like stamp duty. Statistics also showed that many rental homes had one or more spare bedrooms and that was going to end.
"In the next 12 months renters will be forced to share. Spare rooms will disappear and then we will see another kick in the housing market," he said.
AFG's Mark Hewitt said fixed loans had also increased from 18 per cent in August to 20 per cent last month. He said last month's decline in mortgage sales was about double the normal September slump as concerns persisted over the global debt markets and the US subprime difficulties.
"On the positive side, we believe that the underlying market is very strong and these figures represent a blip rather than a change in direction," he said.
He added that this month had shown early indications of a small recovery.
In Queensland the average mortgage has gone up by 12 per cent in the past nine months to $318,000.Source: Courier Mail
Wednesday, October 10, 2007
Mortgage Lenders to go easy on borrowers in difficulty
TheMortgage and Finance Association of Australia (MFAA) has introduced measures to encourage non-bank lenders, mortgage managers and brokers to assist borrowers in financial difficulty.
Under the new provisions, MFAA members can consider varying the terms of a loan repayment once they are aware that the borrower is having trouble meeting repayments.
Also, members can suspend action under the credit facility to recover due payments, and, if a default has not been listed already, the member can choose not to list a default against the borrower until the matter is decided.
MFAA also has urged its 13,000 members to consider encouraging borrowers to make payments they can afford.
"Essentially, our members must now consider whether it is appropriate to vary the terms of repayment on a loan once they are aware a borrower is in financial difficulty," MFAA chief executive Phil Naylor said.
Mr Naylor said about 55 per cent of all mortgages are written by non-banks, mortgage managers and mortgage brokers and it is appropriate that they assist borrowers who are in financial difficulty.
"It is crucial, however, that borrowers who are in some financial difficulty, to advise their lender or broker immediately to ensure the best result can be achieved," he said.
MFAA said that, under the credit facility, members must not require the borrower to apply for early release of their superannuation entitlements or to obtain funds from family, friends or other third parties, prior to the member considering whether to vary the payment terms. Source: AAP
Under the new provisions, MFAA members can consider varying the terms of a loan repayment once they are aware that the borrower is having trouble meeting repayments.
Also, members can suspend action under the credit facility to recover due payments, and, if a default has not been listed already, the member can choose not to list a default against the borrower until the matter is decided.
MFAA also has urged its 13,000 members to consider encouraging borrowers to make payments they can afford.
"Essentially, our members must now consider whether it is appropriate to vary the terms of repayment on a loan once they are aware a borrower is in financial difficulty," MFAA chief executive Phil Naylor said.
Mr Naylor said about 55 per cent of all mortgages are written by non-banks, mortgage managers and mortgage brokers and it is appropriate that they assist borrowers who are in financial difficulty.
"It is crucial, however, that borrowers who are in some financial difficulty, to advise their lender or broker immediately to ensure the best result can be achieved," he said.
MFAA said that, under the credit facility, members must not require the borrower to apply for early release of their superannuation entitlements or to obtain funds from family, friends or other third parties, prior to the member considering whether to vary the payment terms. Source: AAP
Rogue mortgage broker found guilty of unconscionable conduct
A mortgage broker has been found guilty of unconscionable conduct for writing loans a borrower was unable to repay, in a landmark decision expected to have far-reaching implications for the broking industry.
Federal Court judge Roger Gyles found Canberra mortgage broker Kelvin Skeers had engaged in "misleading and deceptive conduct" in writing a $360,000 low-documentation home loan for a 20-year-old man who was unemployed, dyslexic and homeless.
It is the first time a mortgage broker has been found guilty of unconscionable conduct for writing unjust loans, and the precedent could leave thousands of mortgage brokers open to action by the corporate regulator and state fair trading bodies.
According to a study by Fujitsu Home Loans released last month, 40,000 Australian households had been stung by "predatory lending" practices.
Those practices ranged from brokers lending to borrowers who were unable to repay loans, to brokers charging excessively high loan financing costs.
Yesterday's ruling follows a decision last week where Mr Skeers' employer Tonadale - trading as ACT Mortgages - was forced to pay $31,000 in compensation to the borrower.
The Australian Securities and Investments Commission is understood to be now pursuing criminal action against Mr Skeers. In yesterday's case, ASIC alleged Mr Skeers had misrepresented the borrower's financial position and misrepresented to the borrower what would be included in those loan application forms.
"This case highlights that unscrupulous conduct in the mortgage industry is not acceptable and that mortgage brokers can be held responsible," ASIC executive director of enforcement Jan Redfern said.
The unemployed borrower had inherited $240,000 and approached ACT Mortgages twice to borrow additional money to buy a home.
Mr Skeers arranged an initial loan for $360,000 and later a second refinancing loan for $400,000. Justice Gyles said the borrower was unable to repay either loan at the time.
Source: AAP
Federal Court judge Roger Gyles found Canberra mortgage broker Kelvin Skeers had engaged in "misleading and deceptive conduct" in writing a $360,000 low-documentation home loan for a 20-year-old man who was unemployed, dyslexic and homeless.
It is the first time a mortgage broker has been found guilty of unconscionable conduct for writing unjust loans, and the precedent could leave thousands of mortgage brokers open to action by the corporate regulator and state fair trading bodies.
According to a study by Fujitsu Home Loans released last month, 40,000 Australian households had been stung by "predatory lending" practices.
Those practices ranged from brokers lending to borrowers who were unable to repay loans, to brokers charging excessively high loan financing costs.
Yesterday's ruling follows a decision last week where Mr Skeers' employer Tonadale - trading as ACT Mortgages - was forced to pay $31,000 in compensation to the borrower.
The Australian Securities and Investments Commission is understood to be now pursuing criminal action against Mr Skeers. In yesterday's case, ASIC alleged Mr Skeers had misrepresented the borrower's financial position and misrepresented to the borrower what would be included in those loan application forms.
"This case highlights that unscrupulous conduct in the mortgage industry is not acceptable and that mortgage brokers can be held responsible," ASIC executive director of enforcement Jan Redfern said.
The unemployed borrower had inherited $240,000 and approached ACT Mortgages twice to borrow additional money to buy a home.
Mr Skeers arranged an initial loan for $360,000 and later a second refinancing loan for $400,000. Justice Gyles said the borrower was unable to repay either loan at the time.
Source: AAP
Monday, October 08, 2007
Westpac Bank throws RAMS a lifeline
Westpac has bought the RAMS brand and franchise network of 92 stores around the country for $140 million - a fraction of what RAMS was worth when the company listed two months ago.
RAMS' share price crashed a month ago when the company revealed the United States credit squeeze was posing funding problems for some of its loans.
Analysts say while the deal would not be the first option for RAMS, it shows Westpac is confident of riding through the credit market crisis.
Good deal
The past two months for RAMS Home Loans have been disastrous.
Just three weeks after listing on the Australian Stock Exchange, its $2.50 share price had crashed to 55 cents.
The company revealed the United States credit squeeze was creating funding problems for $6 billion worth of its home loans.
But today RAMS has received a lifeline. Westpac chief executive David Morgan announced his company has bought the RAMS brand and its shop fronts and agreed to provide up to $2 billion to help the company's funding problems.
"I'm delighted to announce a significant transaction for Westpac, a transaction that expands our distribution reach and provides us with a new growth path," he said.
"On growth, we plan to introduce a broader range of products to complement the RAMS mortgage offering.
"This will initially include a broader set of mortgage products and items such as credit cards, personal loans and general insurance."
RAMS has 92 stores around the country, where customers can go in and purchase a home loan.
The brand is well recognised and the stores are in prime locations in both regional areas and capital cities. This is what a number of banks have been eying off for the past few weeks.
For $140 million, independent banking analyst William Ammentorp says it is a good deal.
"So the big thing is that branch network. A lot of the RAMS franchisees are small businesses operating in local communities," he said.
"They've been providing mortgages and getting people houses for a number of years.
"They pick up those shopfronts and it allows Westpac to perhaps sell Westpac product through those RAMS distribution outlets, but also the opportunity to have yet another outlet to sell through."
"I think Westpac commented it was a 10 per cent uplift in their branch network when this transaction settles."
Solid sector
Mr Ammentorp also says the deal could be a sign Australia has seen the worst of global credit market crisis.
"The larger organisations are doing very well," he said.
"They are very well-capitalised, very well-run, and in times like this it shows just the strength of the Australian banking sector.
"That's not to say there couldn't be difficulties. Northern Rock, the lines around Northern Rock with people withdrawing funds had absolutely no rational basis yet it happened.
"So I'm not suggesting it could happen here, but you never know what can happen in a marketplace.
"But certainly the Australian banking sector and Australian financial services are renowned around the world for being solid and very, very well-run."
The sale is now subject to shareholder approval and is expected to be finalised by January next year.Source: ABC
RAMS' share price crashed a month ago when the company revealed the United States credit squeeze was posing funding problems for some of its loans.
Analysts say while the deal would not be the first option for RAMS, it shows Westpac is confident of riding through the credit market crisis.
Good deal
The past two months for RAMS Home Loans have been disastrous.
Just three weeks after listing on the Australian Stock Exchange, its $2.50 share price had crashed to 55 cents.
The company revealed the United States credit squeeze was creating funding problems for $6 billion worth of its home loans.
But today RAMS has received a lifeline. Westpac chief executive David Morgan announced his company has bought the RAMS brand and its shop fronts and agreed to provide up to $2 billion to help the company's funding problems.
"I'm delighted to announce a significant transaction for Westpac, a transaction that expands our distribution reach and provides us with a new growth path," he said.
"On growth, we plan to introduce a broader range of products to complement the RAMS mortgage offering.
"This will initially include a broader set of mortgage products and items such as credit cards, personal loans and general insurance."
RAMS has 92 stores around the country, where customers can go in and purchase a home loan.
The brand is well recognised and the stores are in prime locations in both regional areas and capital cities. This is what a number of banks have been eying off for the past few weeks.
For $140 million, independent banking analyst William Ammentorp says it is a good deal.
"So the big thing is that branch network. A lot of the RAMS franchisees are small businesses operating in local communities," he said.
"They've been providing mortgages and getting people houses for a number of years.
"They pick up those shopfronts and it allows Westpac to perhaps sell Westpac product through those RAMS distribution outlets, but also the opportunity to have yet another outlet to sell through."
"I think Westpac commented it was a 10 per cent uplift in their branch network when this transaction settles."
Solid sector
Mr Ammentorp also says the deal could be a sign Australia has seen the worst of global credit market crisis.
"The larger organisations are doing very well," he said.
"They are very well-capitalised, very well-run, and in times like this it shows just the strength of the Australian banking sector.
"That's not to say there couldn't be difficulties. Northern Rock, the lines around Northern Rock with people withdrawing funds had absolutely no rational basis yet it happened.
"So I'm not suggesting it could happen here, but you never know what can happen in a marketplace.
"But certainly the Australian banking sector and Australian financial services are renowned around the world for being solid and very, very well-run."
The sale is now subject to shareholder approval and is expected to be finalised by January next year.Source: ABC
Sunday, August 26, 2007
More mortgage pain ahead following credit issues in the US
The CBA says mortgage rates to rise even if no RBA rise Non-bank lenders' rates likely to rise the most Australian stocks slumped almost 3% last week.
The nation's biggest home lender has warned that home-owners' mortgage rates will rise as the fallout from the US housing crisis continues to spread through global financial markets.
As the Australian stock market suffered another $48 billion plunge in value yesterday - taking its losses in the past three weeks to almost 10 per cent - Commonwealth Bank chief executive Ralph Norris said mortgage rates were likely to rise even if the Reserve Bank did not lift official rates.
Non-bank lenders most affected
Mr Norris said non-bank lenders - companies such as Bluestone, Wizard and Aussie Home Loans - would be more significantly affected by the credit crunch triggered by the crisis among poor-quality sub-prime home loans in the US.
He said the Commonwealth had no plans to lift rates, "but the market is driven by supply and demand, and if funding costs increase significantly, then we pass that on".
"The fact of the matter is the price of credit in the market internationally has moved, so there will at some stage be some increase in rates," he said.
"In regard to the level of those increases, non-bank lenders are going to be in a situation where they're going to have to pass on significantly greater increases than a bank like us."
Bluestone rates already raised above RBA rate
The Australian reported this week that Bluestone, hit by the higher cost of borrowing money to on-lend to its customers, had been forced to raise mortgage rates by 17-55 basis points.
Other lenders, particularly those offering low-documentation loans to customers with poor credit histories, are also likely to pass on the higher costs.
Aussie Home Loans' John Symond has warned rates will rise by about 0.25 percentage points.
And Mr Norris warned home-owners that he expected official interest rates to rise further after the Reserve Bank's increase of 0.25 percentage points last week to 6.5 per cent.
The sub-prime crisis continues to hurt international stock markets, with the Australian market, which took its lead from a falling Wall St, slumping almost 3 per cent yesterday.
The benchmark S&P/ASX 200 index, which yesterday fell 176.8 points to 5788 points, is down 9.9 per cent - just shy of the technical correction point of 10 per cent - since its record high of 6422.3 on July 24.
Aussie stock market falls
The Australian stock market, bolstered by the strength of its resources stocks, has in recent months been able to avoid following the big falls on Wall St.
But the Dow Jones Industrial Average is down just 7 per cent since the sub-prime crisis first broke three weeks ago, and in the past two trading sessions, the Australian stock market has suffered bigger falls than its New York counterpart.
Failures by mortgage lenders in the US, most of which were dealing in the riskier end of the housing market, have kept the US share market on tenterhooks for close to a month, and every day that provides a new financial hardship story pushes that market down further.
Investors in Australia's worst-affected hedge fund, Basis Capital's Yield Fund, were told yesterday by the fund's Sydney-based manager that they were now likely to lose more than 80 per cent of their money because of the sub-prime meltdown. Source: The Australian
The nation's biggest home lender has warned that home-owners' mortgage rates will rise as the fallout from the US housing crisis continues to spread through global financial markets.
As the Australian stock market suffered another $48 billion plunge in value yesterday - taking its losses in the past three weeks to almost 10 per cent - Commonwealth Bank chief executive Ralph Norris said mortgage rates were likely to rise even if the Reserve Bank did not lift official rates.
Non-bank lenders most affected
Mr Norris said non-bank lenders - companies such as Bluestone, Wizard and Aussie Home Loans - would be more significantly affected by the credit crunch triggered by the crisis among poor-quality sub-prime home loans in the US.
He said the Commonwealth had no plans to lift rates, "but the market is driven by supply and demand, and if funding costs increase significantly, then we pass that on".
"The fact of the matter is the price of credit in the market internationally has moved, so there will at some stage be some increase in rates," he said.
"In regard to the level of those increases, non-bank lenders are going to be in a situation where they're going to have to pass on significantly greater increases than a bank like us."
Bluestone rates already raised above RBA rate
The Australian reported this week that Bluestone, hit by the higher cost of borrowing money to on-lend to its customers, had been forced to raise mortgage rates by 17-55 basis points.
Other lenders, particularly those offering low-documentation loans to customers with poor credit histories, are also likely to pass on the higher costs.
Aussie Home Loans' John Symond has warned rates will rise by about 0.25 percentage points.
And Mr Norris warned home-owners that he expected official interest rates to rise further after the Reserve Bank's increase of 0.25 percentage points last week to 6.5 per cent.
The sub-prime crisis continues to hurt international stock markets, with the Australian market, which took its lead from a falling Wall St, slumping almost 3 per cent yesterday.
The benchmark S&P/ASX 200 index, which yesterday fell 176.8 points to 5788 points, is down 9.9 per cent - just shy of the technical correction point of 10 per cent - since its record high of 6422.3 on July 24.
Aussie stock market falls
The Australian stock market, bolstered by the strength of its resources stocks, has in recent months been able to avoid following the big falls on Wall St.
But the Dow Jones Industrial Average is down just 7 per cent since the sub-prime crisis first broke three weeks ago, and in the past two trading sessions, the Australian stock market has suffered bigger falls than its New York counterpart.
Failures by mortgage lenders in the US, most of which were dealing in the riskier end of the housing market, have kept the US share market on tenterhooks for close to a month, and every day that provides a new financial hardship story pushes that market down further.
Investors in Australia's worst-affected hedge fund, Basis Capital's Yield Fund, were told yesterday by the fund's Sydney-based manager that they were now likely to lose more than 80 per cent of their money because of the sub-prime meltdown. Source: The Australian
Mortgage Broker sees credit crisis as an opportunity
Mortgage broker Mortgage Choice sees ongoing concerns in global credit markets as an opportunity, rather than a risk to its business, the company's managing director Paul Lahiff said today.
The Sydney-based mortgage broker today reported a 9.7 per cent increase in net profit to a record $19.59 million for 2006/07, underpinned by an expansion of its business in states other than NSW.
Mr Lahiff said the result was achieved despite challenging market conditions.
"This result clearly demonstrates the strength of our national model," Mr Lahiff said.
"We were less reliant on what is currently a variable NSW housing market to provide the performance we were after.
"By contrast, Western Australia and Queensland have continued their strong growth off the back of the resources boom, while Victoria and South Australia performed in line with longer term historical trends.
"The results achieved underline the fact that Mortgage Choice has an extremely high quality, proven business model - one that is capable of delivering a sound performance even in challenging market conditions."
Mr Lahiff said ructions in financial markets stemming from problems in the US sub-prime mortgage sector had not impacted Mortgage Choice.
"We don't manufacture, we don't fund, we don't service the loans - that's the responsibility of the lenders.
"We don't have our own mortgage products which means we have no balance sheet or funding risk ... so (there's been) absolutely no impact from the events of the past few weeks."
Mr Lahiff said the company's role as a mortgage broker, rather than a lender, meant it would remain well insulated from any further fallout in credit markets.
"We don't have a direct exposure there because we don't have any funding or manufacturing capabilities ... there will be some waves that flow out from that (which) will inevitably touch us in some shape or form (but) we don't believe those to be significant.
"We also believe that while (some) organisations may tend to batten down the hatches, we see a good opportunity to go forward."
Mr Lahiff said the portion of "non-conforming" loans - the equivalent of a sub-prime loan - originated by Mortgage Choice was "incredibly low".
"The latest set of data (shows) that of the total loans that we booked, 0.67 per cent were non-conforming ... it's not a major part of our business," he said.
And while the ongoing global credit crunch is likely to impact on lending rates in Australia, chiefly in the non-bank sector, chief financial officer Tony Crossley said Mortgage Choice was in a position to take advantage.
"Essentially, in the short term, there's certainly upward pressure on interest rates ... the extent to which it's passed on is really a judgement call for the lenders," Mr Crossley said.
"From our point of view we think we are reasonably well placed to take advantage of any of that because (of our ability) to shift from one type of lender to another."
Mr Lahiff said that given the current environment, the company would "be alert to acquisition opportunities" but that organic growth would remain its chief focus.
"In this market, visibility, strong brand values, quality, consistency and track record are the keys," Mr Lahiff said.
"Lenders are increasingly basing rewards on quality, sustainability and performance." "We are confident that Mortgage Choice is well placed to achieve profitable growth in the coming year.
"Improved broker recruitment, an increasing commercial and retail office presence and through our invest-to-grow strategy, the ability to scale up the business will continue to be important going forward."
Mortgage Choice declared a final fully franked dividend of 8.5 cents per share, bringing the total ordinary dividend for the year to 14 cents per share.
Source: AAP
The Sydney-based mortgage broker today reported a 9.7 per cent increase in net profit to a record $19.59 million for 2006/07, underpinned by an expansion of its business in states other than NSW.
Mr Lahiff said the result was achieved despite challenging market conditions.
"This result clearly demonstrates the strength of our national model," Mr Lahiff said.
"We were less reliant on what is currently a variable NSW housing market to provide the performance we were after.
"By contrast, Western Australia and Queensland have continued their strong growth off the back of the resources boom, while Victoria and South Australia performed in line with longer term historical trends.
"The results achieved underline the fact that Mortgage Choice has an extremely high quality, proven business model - one that is capable of delivering a sound performance even in challenging market conditions."
Mr Lahiff said ructions in financial markets stemming from problems in the US sub-prime mortgage sector had not impacted Mortgage Choice.
"We don't manufacture, we don't fund, we don't service the loans - that's the responsibility of the lenders.
"We don't have our own mortgage products which means we have no balance sheet or funding risk ... so (there's been) absolutely no impact from the events of the past few weeks."
Mr Lahiff said the company's role as a mortgage broker, rather than a lender, meant it would remain well insulated from any further fallout in credit markets.
"We don't have a direct exposure there because we don't have any funding or manufacturing capabilities ... there will be some waves that flow out from that (which) will inevitably touch us in some shape or form (but) we don't believe those to be significant.
"We also believe that while (some) organisations may tend to batten down the hatches, we see a good opportunity to go forward."
Mr Lahiff said the portion of "non-conforming" loans - the equivalent of a sub-prime loan - originated by Mortgage Choice was "incredibly low".
"The latest set of data (shows) that of the total loans that we booked, 0.67 per cent were non-conforming ... it's not a major part of our business," he said.
And while the ongoing global credit crunch is likely to impact on lending rates in Australia, chiefly in the non-bank sector, chief financial officer Tony Crossley said Mortgage Choice was in a position to take advantage.
"Essentially, in the short term, there's certainly upward pressure on interest rates ... the extent to which it's passed on is really a judgement call for the lenders," Mr Crossley said.
"From our point of view we think we are reasonably well placed to take advantage of any of that because (of our ability) to shift from one type of lender to another."
Mr Lahiff said that given the current environment, the company would "be alert to acquisition opportunities" but that organic growth would remain its chief focus.
"In this market, visibility, strong brand values, quality, consistency and track record are the keys," Mr Lahiff said.
"Lenders are increasingly basing rewards on quality, sustainability and performance." "We are confident that Mortgage Choice is well placed to achieve profitable growth in the coming year.
"Improved broker recruitment, an increasing commercial and retail office presence and through our invest-to-grow strategy, the ability to scale up the business will continue to be important going forward."
Mortgage Choice declared a final fully franked dividend of 8.5 cents per share, bringing the total ordinary dividend for the year to 14 cents per share.
Source: AAP
Sunday, August 12, 2007
Interest rates, unemployment will soar under Labor, says Liberal funded report on workplace reform by Labor arch rivals Australian Chamber of Commerce
A new report has warned that Labor's promise to abolish the Coalition's WorkChoices reforms if its wins government would push up mortgage interest rates and unemployment. Labor denies this as a false assumption, and the report is written by liberal pals ACC.
The Australian Chamber of Commerce and Industry (ACCI) commissioned the economic consultants Econtech to model the consequences if the industrial relations landscape of 1993 was restored.
Its study predicted that would result in a 1.3 per cent hike in inflation and interest rates would climb by 1.4 per cent, pushing up the average mortgage by $273 a month.
ACCI spokesman Peter Hendy says the axing of WorkChoices alone makes up a sizeable share of the predictions.
"You would see about a third of the results here, so a very, very significant impact on the Australian economy," he said.
Mr Hendy says the report also forecasts major job losses.
"If you reverse industrial relations reform, you will have a massive impact upon the job market," he said.
"There would be something like up to 316,000 jobs lost.
"We're sending a message to both major political parties that you cannot afford to roll back the industrial relations reforms we've had to date."
But deputy Opposition leader Julia Gillard has told Channel Nine the report does not make sense and is based on a false assumption.
"The key claim in it is that Labor's industrial relations system is somehow going to have pattern bargaining in it," she said.
The report is being officially released later today.
Source: ABC
The Australian Chamber of Commerce and Industry (ACCI) commissioned the economic consultants Econtech to model the consequences if the industrial relations landscape of 1993 was restored.
Its study predicted that would result in a 1.3 per cent hike in inflation and interest rates would climb by 1.4 per cent, pushing up the average mortgage by $273 a month.
ACCI spokesman Peter Hendy says the axing of WorkChoices alone makes up a sizeable share of the predictions.
"You would see about a third of the results here, so a very, very significant impact on the Australian economy," he said.
Mr Hendy says the report also forecasts major job losses.
"If you reverse industrial relations reform, you will have a massive impact upon the job market," he said.
"There would be something like up to 316,000 jobs lost.
"We're sending a message to both major political parties that you cannot afford to roll back the industrial relations reforms we've had to date."
But deputy Opposition leader Julia Gillard has told Channel Nine the report does not make sense and is based on a false assumption.
"The key claim in it is that Labor's industrial relations system is somehow going to have pattern bargaining in it," she said.
The report is being officially released later today.
Source: ABC
Monday, August 06, 2007
Labor broadside at PM's mortgage rate blame game
Labor has hit back at John Howard after he and Finance Minister Nick Minchin blamed the states for pushing up interest rates.
Ahead of an expected interest rate rise this week, federal Finance Minister Nick Minchin today said the Labor states were putting upward pressure on rates by accruing too much debt.
The Reserve Bank of Australia (RBA) is widely tipped to raise interest rates by one quarter of one per cent on Wednesday.
Senator Minchin said the Federal Government was minimising upward pressure on inflation and mortgage interest rates.
"Our fiscal policy settings are such that we are minimising the pressure on inflation and mortgage interest rates while we observe that the state Labor governments all going into deficit, racking up debts,'' he told the Ten Network.
"They're going to rack up $80 billion in debt over the next four years, so we are concerned about the extent to which state Labor governments are putting upward pressure on interest rates.''
Later, the Liberal Party launched an ad on internet video website YouTube called Labor can't manage money, attacking the states' escalating debt.
"Never forget, it is governments who borrow money and get into debt who put upward pressure in interest rates,'' the ad says.
Senator Minchin indicated he did not think the expected interest rate rise later this week was warranted, pointing out underlying inflation was running at 2.6 per cent.
"From our point of view, their job is to keep inflation between two to three per cent and that's where inflation is,'' he said.
However, National Australia Bank chief executive John Stewart today said he thought there was a 50/50 chance the RBA would lift rates this week.
Opposition Leader Kevin Rudd said Prime Minister John Howard and the Federal Government were trying to pass the buck.
"Mr Howard seems to now be saying that if there's a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard,'' he said.
"I find that a very interesting exercise in the blame game.''
West Australian Premier Alan Carpenter also accused the Federal Government of trying to shift blame ahead of the federal election.
"John Howard and Nick Minchin are asserting states are running deficits and that's affecting interest rates,'' Mr Carpenter said.
"It doesn't work that way.
"John Howard told people he'd keep interest rates down and he hasn't.
"So he's looking for people to blame - he's to blame.''
Senator Minchin today also responded to calls from the Real Estate Institute of Australia to double the first home buyers grant to $14,000 to give people a better chance of entering the market.
He said such a move would drive up housing prices unless state governments released more land for housing.
"I do caution against those advocating doubling it because that will end up just feeding into prices and no one will be better off,'' Senator Minchin said.
"The trouble with that is that it adds to demand.
"You would not want to double the first home owners grant unless you were sure there was going to be a supply response at the state level.''
Source: AAP
Ahead of an expected interest rate rise this week, federal Finance Minister Nick Minchin today said the Labor states were putting upward pressure on rates by accruing too much debt.
The Reserve Bank of Australia (RBA) is widely tipped to raise interest rates by one quarter of one per cent on Wednesday.
Senator Minchin said the Federal Government was minimising upward pressure on inflation and mortgage interest rates.
"Our fiscal policy settings are such that we are minimising the pressure on inflation and mortgage interest rates while we observe that the state Labor governments all going into deficit, racking up debts,'' he told the Ten Network.
"They're going to rack up $80 billion in debt over the next four years, so we are concerned about the extent to which state Labor governments are putting upward pressure on interest rates.''
Later, the Liberal Party launched an ad on internet video website YouTube called Labor can't manage money, attacking the states' escalating debt.
"Never forget, it is governments who borrow money and get into debt who put upward pressure in interest rates,'' the ad says.
Senator Minchin indicated he did not think the expected interest rate rise later this week was warranted, pointing out underlying inflation was running at 2.6 per cent.
"From our point of view, their job is to keep inflation between two to three per cent and that's where inflation is,'' he said.
However, National Australia Bank chief executive John Stewart today said he thought there was a 50/50 chance the RBA would lift rates this week.
Opposition Leader Kevin Rudd said Prime Minister John Howard and the Federal Government were trying to pass the buck.
"Mr Howard seems to now be saying that if there's a problem with interest rates in Australia, it's because of the states, it's because of anybody else apart from Mr Howard,'' he said.
"I find that a very interesting exercise in the blame game.''
West Australian Premier Alan Carpenter also accused the Federal Government of trying to shift blame ahead of the federal election.
"John Howard and Nick Minchin are asserting states are running deficits and that's affecting interest rates,'' Mr Carpenter said.
"It doesn't work that way.
"John Howard told people he'd keep interest rates down and he hasn't.
"So he's looking for people to blame - he's to blame.''
Senator Minchin today also responded to calls from the Real Estate Institute of Australia to double the first home buyers grant to $14,000 to give people a better chance of entering the market.
He said such a move would drive up housing prices unless state governments released more land for housing.
"I do caution against those advocating doubling it because that will end up just feeding into prices and no one will be better off,'' Senator Minchin said.
"The trouble with that is that it adds to demand.
"You would not want to double the first home owners grant unless you were sure there was going to be a supply response at the state level.''
Source: AAP
Saturday, August 04, 2007
Subprime mortgage meltdown could hurt Macquarie Bank
Australia's biggest investment bank, Macquarie, has become the latest local fund manager to confirm its potential exposure to the US subprime mortgage market. Two of its funds face losses of up to 25 per cent, or as much as $300 million.
Macquarie has made its name around the world for delivering big returns for investors.
That global reputation is a key selling point in Macquarie Fortress Investments (MFI), a retail arm managing high returns for small investors prepared to take a risk.
Some of that risk has been in the US mortgage market and last night, Macquarie told investors that two high-yield funds might be hurt by the widening crisis in subprime mortgage defaults.
In a statement to the Australian Stock Exchange last night, MFI director Peter Lucas said imbalances caused by a spillover from subprime defaults could mean losses of up to 25 per cent.
"While Fortress notes have no direct exposure to US subprime mortgages, the portfolio continues to be adversely impacted by price volatility in the US credit markets," a statement said.
Mr Lucas said while there was no reason to believe Macquarie would not be able to meet interest and principal payments, he was working to avoid a margin call when worried lenders call in their loans.
"As the market value of the portfolio has decreased further, it has become necessary for the investment manager to sell selected loans and apply the proceeds to reduce the leverage facility so that the loan-to-value ratio meets the applicable borrowing covenants," the statement said.
Macquarie's Fortress Investments joins two other Australian funds exposed to the US subprime crisis, Basis Capital and Absolute Capital, which have flagged potential losses over the past fortnight.
Wall Street losses
There was also more bad news at the subprime epicentre this morning.
The Dow Jones Industrial Average plunged more than 1 per cent in late trade after two home loan insurers said their billion-dollar stake in a subprime mortgage company might be worthless.
The late news caused a sell off in the banking sector, erasing earlier gains on Wall Street.
Still, market watchers like UBS senior economist Paul Donovan are continuing to focus on the fundamentals, such as a strong underlying US economy.
"It's essentially an issue of confidence - are investors willing to take risks or not?" he said.
But Mr Donovan says widening subprime mortgage defaults first need to be contained.
"If that spreads and we see lenders refusing credit elsewhere, it becomes more significant," he said.
Today's good news in the US was consumer confidence for June, which hit its highest level in almost six years.
But the next reading will be critical, and any sign that Americans are dramatically trimming household budgets on mortgage concerns could put a shadow across assurances that the world's biggest economy is in the best of health.
Macquarie has made its name around the world for delivering big returns for investors.
That global reputation is a key selling point in Macquarie Fortress Investments (MFI), a retail arm managing high returns for small investors prepared to take a risk.
Some of that risk has been in the US mortgage market and last night, Macquarie told investors that two high-yield funds might be hurt by the widening crisis in subprime mortgage defaults.
In a statement to the Australian Stock Exchange last night, MFI director Peter Lucas said imbalances caused by a spillover from subprime defaults could mean losses of up to 25 per cent.
"While Fortress notes have no direct exposure to US subprime mortgages, the portfolio continues to be adversely impacted by price volatility in the US credit markets," a statement said.
Mr Lucas said while there was no reason to believe Macquarie would not be able to meet interest and principal payments, he was working to avoid a margin call when worried lenders call in their loans.
"As the market value of the portfolio has decreased further, it has become necessary for the investment manager to sell selected loans and apply the proceeds to reduce the leverage facility so that the loan-to-value ratio meets the applicable borrowing covenants," the statement said.
Macquarie's Fortress Investments joins two other Australian funds exposed to the US subprime crisis, Basis Capital and Absolute Capital, which have flagged potential losses over the past fortnight.
Wall Street losses
There was also more bad news at the subprime epicentre this morning.
The Dow Jones Industrial Average plunged more than 1 per cent in late trade after two home loan insurers said their billion-dollar stake in a subprime mortgage company might be worthless.
The late news caused a sell off in the banking sector, erasing earlier gains on Wall Street.
Still, market watchers like UBS senior economist Paul Donovan are continuing to focus on the fundamentals, such as a strong underlying US economy.
"It's essentially an issue of confidence - are investors willing to take risks or not?" he said.
But Mr Donovan says widening subprime mortgage defaults first need to be contained.
"If that spreads and we see lenders refusing credit elsewhere, it becomes more significant," he said.
Today's good news in the US was consumer confidence for June, which hit its highest level in almost six years.
But the next reading will be critical, and any sign that Americans are dramatically trimming household budgets on mortgage concerns could put a shadow across assurances that the world's biggest economy is in the best of health.
Friday, August 03, 2007
US credit market and subprime mortgage securities meltdown creates opportunities for scavengers
Not everyone's afraid of the credit market meltdown. For some firms subprime slaughter has a whiff of opportunity to it. Now they're coming out to hunt.
They're working in scary territory. Tuesday analysts following insurance giant AIG calculated that the company might have lost as much as $2.3 billion from its holdings of securities backed by subprime mortgages. Macquarie Bank of Australia disclosed that two of its investment funds could lose up to 25%, or $300 million, of their value because of exposure to the market.
A third Bear Stearns fund had been closed to redemptions, a month after the bank, which happens to be among the biggest packagers of mortgage securities, shut down two of its other mortgage-laden hedge funds in June amid margin calls and redemptions.
Bear Stearns, whose shares were down more than 2% Wednesday and are at a 19-month low, also faces an arbitration suit by a 73-year-old investor who claims the firm misled investors about its exposure to subprime mortgages.
Still, it wasn't a complete bloodbath. Several firms came out to deny rumors of their imminent demise--Beazer Homes being one. The mortgage company denied it is approaching the bankruptcy abyss, refuting rumors that started after American Home Mortgage shares plunged 90% Tuesday when the company said it was having trouble getting funding.
Caxton Associates, an $11 billion New York hedge fund firm, said Wednesday that contrary to rumors on the Internet, its flagship fund is up 3.2% for the year after fees. Caxton did say the fund was down 3% in July and that it had moved to reduce its value-at-risk (how much it could lose at any one time under certain market conditions) to 0.5% of capital.
Caxton president Peter D'Angelo wrote in a letter to investors Wednesday that circulated on the Internet, "We believe that this market change will continue to provide renewed opportunities in the macro trading environment."
He's not the only one to think this subprime meltdown may lead to profits. Several funds specializing in buying up distressed debt are swooping in, hoping the paper was written down to artificially low levels and will rebound once investors regain their sea legs.
Citadel Investments, the Chicago hedge fund, bought the credit portfolio of Sowood Capital earlier this week after the troubled fund ran into problems with the repricing of assets in the subprime sector. Marathon Asset Management, a $9 billion New York fund firm, is said to be setting up a distressed subprime fund, seeing "significant" opportunity in the sector. Another fund that specializes in distressed assets, Harbinger Capital, is thought to have logged double-digit gains in July.
Official performance figures for hedge funds will be released next week by Hedge Fund Research, the Chicago firm that keeps track of the industry.
Fund managers who had sold short the shares of mortgage lenders and other financial firms over the last few months have also made money.
Charles Gradante, research director at the Hennessee Group, which advises clients on hedge fund investments, said many long/short hedge funds had earmarked 5% to 10% of fund assets to be short the lenders and the subprime index since last year. The group is up 9% year to date, one-third of that gain attributable to making the right bet on subprime.
But most funds aren't crazy enough to risk buying up the distressed debt and riding out the market, Gradante says.
Many hedge fund managers have been moving to cash until the panic subsides. "The fundamentals are still good, but the big unknown is how much the panic is building up," he says. "It's like a kettle with steam. You just don't know when it's going to blow."
On Wednesday, Fitch Ratings affirmed $20 billion worth of residential mortgage backed securities and downgraded $2.4 billion. It has been reviewing 170 deals, about $7 billion worth, and will be announcing its ratings action over the next two weeks. This first $2.4 billion batch was what was considered the worst performing of the 170 deals.
Credit markets have seized up in the last few weeks after a record first half of the year, when $452 billion worth of leveraged loans and $98 billion of high-yield bonds hit the market, according to Standard & Poor's. The average quality of those new issues was lower than in the same period last year--about 48% of it was rated B-minus or below, compared with 32% of new issues in the first half of 2006.
But some point out that the credit markets are not so much in severe distress as they are coming down off remarkably good times. Spreads between Treasurys and speculative grade credit are 417 points. But the longer-term average is more like 450 points, according to S&P, meaning spreads have a way to go to meet the average.
The widest spreads came after the dot-com bubble burst, when speculative grade credit traded at 1,000 basis points or more over Treasurys. "The market needed to be prepriced," says Diane Vazza, managing director of fixed income research at S&P. "But you can argue that the market has gone too far the other way, and we would say that is the case."Source: Forbes.com
They're working in scary territory. Tuesday analysts following insurance giant AIG calculated that the company might have lost as much as $2.3 billion from its holdings of securities backed by subprime mortgages. Macquarie Bank of Australia disclosed that two of its investment funds could lose up to 25%, or $300 million, of their value because of exposure to the market.
A third Bear Stearns fund had been closed to redemptions, a month after the bank, which happens to be among the biggest packagers of mortgage securities, shut down two of its other mortgage-laden hedge funds in June amid margin calls and redemptions.
Bear Stearns, whose shares were down more than 2% Wednesday and are at a 19-month low, also faces an arbitration suit by a 73-year-old investor who claims the firm misled investors about its exposure to subprime mortgages.
Still, it wasn't a complete bloodbath. Several firms came out to deny rumors of their imminent demise--Beazer Homes being one. The mortgage company denied it is approaching the bankruptcy abyss, refuting rumors that started after American Home Mortgage shares plunged 90% Tuesday when the company said it was having trouble getting funding.
Caxton Associates, an $11 billion New York hedge fund firm, said Wednesday that contrary to rumors on the Internet, its flagship fund is up 3.2% for the year after fees. Caxton did say the fund was down 3% in July and that it had moved to reduce its value-at-risk (how much it could lose at any one time under certain market conditions) to 0.5% of capital.
Caxton president Peter D'Angelo wrote in a letter to investors Wednesday that circulated on the Internet, "We believe that this market change will continue to provide renewed opportunities in the macro trading environment."
He's not the only one to think this subprime meltdown may lead to profits. Several funds specializing in buying up distressed debt are swooping in, hoping the paper was written down to artificially low levels and will rebound once investors regain their sea legs.
Citadel Investments, the Chicago hedge fund, bought the credit portfolio of Sowood Capital earlier this week after the troubled fund ran into problems with the repricing of assets in the subprime sector. Marathon Asset Management, a $9 billion New York fund firm, is said to be setting up a distressed subprime fund, seeing "significant" opportunity in the sector. Another fund that specializes in distressed assets, Harbinger Capital, is thought to have logged double-digit gains in July.
Official performance figures for hedge funds will be released next week by Hedge Fund Research, the Chicago firm that keeps track of the industry.
Fund managers who had sold short the shares of mortgage lenders and other financial firms over the last few months have also made money.
Charles Gradante, research director at the Hennessee Group, which advises clients on hedge fund investments, said many long/short hedge funds had earmarked 5% to 10% of fund assets to be short the lenders and the subprime index since last year. The group is up 9% year to date, one-third of that gain attributable to making the right bet on subprime.
But most funds aren't crazy enough to risk buying up the distressed debt and riding out the market, Gradante says.
Many hedge fund managers have been moving to cash until the panic subsides. "The fundamentals are still good, but the big unknown is how much the panic is building up," he says. "It's like a kettle with steam. You just don't know when it's going to blow."
On Wednesday, Fitch Ratings affirmed $20 billion worth of residential mortgage backed securities and downgraded $2.4 billion. It has been reviewing 170 deals, about $7 billion worth, and will be announcing its ratings action over the next two weeks. This first $2.4 billion batch was what was considered the worst performing of the 170 deals.
Credit markets have seized up in the last few weeks after a record first half of the year, when $452 billion worth of leveraged loans and $98 billion of high-yield bonds hit the market, according to Standard & Poor's. The average quality of those new issues was lower than in the same period last year--about 48% of it was rated B-minus or below, compared with 32% of new issues in the first half of 2006.
But some point out that the credit markets are not so much in severe distress as they are coming down off remarkably good times. Spreads between Treasurys and speculative grade credit are 417 points. But the longer-term average is more like 450 points, according to S&P, meaning spreads have a way to go to meet the average.
The widest spreads came after the dot-com bubble burst, when speculative grade credit traded at 1,000 basis points or more over Treasurys. "The market needed to be prepriced," says Diane Vazza, managing director of fixed income research at S&P. "But you can argue that the market has gone too far the other way, and we would say that is the case."Source: Forbes.com
APRA to change rules that will hurt fist home buyers and low income earners buying a home according to Mortgage Insurers PMI
APRA may change the rules for first time home buyers and low-income borrowers making them pay a higher interest rate as a result of new capital rules announced by APRA, Australia's financial services industry regulator, according to one of Australia's two providers of lenders mortgage insurance, PMI.
PMI Australia chief executive Ian Graham condemned the proposed changes announced by APRA on Monday, which reduce concessions for the amount of regulatory capital required to be held by lenders in support of home loans protected by LMI cover.
With less incentive to use LMI, lenders were likely to lift interest rates for the more disadvantaged borrowers, Mr Grahame said.
The changes to the capital rules governing home loans from banks, building societies and credit unions are part of the so-called Basel II accord.
Basel II aims to harmonise principles governing regulatory capital and how lenders manage risk, with the overall objective of reducing volatility in the global financial system.
Mr Graham said PMI was concerned that the Australian Prudential Regulation Authority had taken a too narrow view of the proposed changes.
Source: The Australian
PMI Australia chief executive Ian Graham condemned the proposed changes announced by APRA on Monday, which reduce concessions for the amount of regulatory capital required to be held by lenders in support of home loans protected by LMI cover.
With less incentive to use LMI, lenders were likely to lift interest rates for the more disadvantaged borrowers, Mr Grahame said.
The changes to the capital rules governing home loans from banks, building societies and credit unions are part of the so-called Basel II accord.
Basel II aims to harmonise principles governing regulatory capital and how lenders manage risk, with the overall objective of reducing volatility in the global financial system.
Mr Graham said PMI was concerned that the Australian Prudential Regulation Authority had taken a too narrow view of the proposed changes.
Source: The Australian
Thursday, August 02, 2007
Macquarie bank stocks fall in credit confidence loss due to US subprime mortgage crisis
The stocks of Macquarie Bank have fallen over seven per cent after it revealed last night that two of its funds faced losses related to the US sub-prime mortgage crisis of up to 25 per cent.
The listed Macquarie Fortress Notes fund has about $140 million of investors' money and the unlisted Macquarie Fortress Fund has about $80 million.
Neither fund has direct exposure to US subprime mortgages, but both have been hit by price volatility in US credit markets triggered by the sub-prime crisis.
Macquarie said it had been forced to sell some of the loans in the portfolio in a subdued market after receiving margin calls on the funds, which are highly geared at six to seven times.
The average price of assets in the two funds fell four per cent in June.
"We expect the impact of the price declines in July to result in a further deterioration in NAV (net asset value) for 31 July 2007 of approximately 20 to 25 cents,'' Macquarie said last night.
Source: Courier Mail
The listed Macquarie Fortress Notes fund has about $140 million of investors' money and the unlisted Macquarie Fortress Fund has about $80 million.
Neither fund has direct exposure to US subprime mortgages, but both have been hit by price volatility in US credit markets triggered by the sub-prime crisis.
Macquarie said it had been forced to sell some of the loans in the portfolio in a subdued market after receiving margin calls on the funds, which are highly geared at six to seven times.
The average price of assets in the two funds fell four per cent in June.
"We expect the impact of the price declines in July to result in a further deterioration in NAV (net asset value) for 31 July 2007 of approximately 20 to 25 cents,'' Macquarie said last night.
Source: Courier Mail
Monday, July 30, 2007
ABN AMRO pulls back from Barclays bid
Major World and Dutch bank ABN AMRO has withdrawn its backing of a takeover bid from Barclays and said it was no longer formally recommending offers from the British bank or a Royal Bank of Scotland-led consortium.
The Netherlands' biggest bank, which faces competing offers of 65.6 billion euros ($A105.56 billion) from Barclays and 71 billion euros ($A114.25 billion) from the consortium of RBS, Fortis of Belgium and Spain's Santander, also reported a 7.1 per cent decline in quarterly net profit.
ABN originally backed Barclays when announcing a deal to merge with it in April.
But it has now effectively withdrawn its recommendation even after Barclays sweetened its offer to buy ABN last week to include more cash.
ABN's boards - the supervisory board and managing board - said they were currently not in a position to recommend the offers from Barclays or the consortium.
"ABN AMRO will further engage with both parties with the aim of continuing to ensure a level playing field and minimising any of the uncertainties currently associated with the offers with a view to optimising the attractive alternatives available to ABN AMRO's shareholders," ABN said in a statement.
Barclays' offer is formally conditional on a recommendation from ABN, but sources have told Reuters that it was unlikely to pull out of the race as a result of the move, and could instead revise that requirement.
ABN's fate would be decided by shareholders, who would tender their shares to either bidder after formal offers are launched.
The RBS-led offer, which would result in a break-up of ABN, is more than 90 per cent in cash and adds up to 38.1 euros per ABN share at current market prices - against Barclays' bid at 34.7 euros per share.
Barclays sweetened its offer with a cash portion, as China Development Bank and Singapore's Temasek took stakes in the bank, but its offer remains mostly in shares, and therefore vulnerable to recent market turbulence.
ABN reported a net profit of 1.13 billion euros ($A1.82 billion) in the second quarter, compared with 1.216 billion euros ($A1.96 billion) a year earlier and the 1 billion euros average forecast in a Reuters survey of five analysts. The figures excluded discontinued operations.
Source: AAP and Reuters
The Netherlands' biggest bank, which faces competing offers of 65.6 billion euros ($A105.56 billion) from Barclays and 71 billion euros ($A114.25 billion) from the consortium of RBS, Fortis of Belgium and Spain's Santander, also reported a 7.1 per cent decline in quarterly net profit.
ABN originally backed Barclays when announcing a deal to merge with it in April.
But it has now effectively withdrawn its recommendation even after Barclays sweetened its offer to buy ABN last week to include more cash.
ABN's boards - the supervisory board and managing board - said they were currently not in a position to recommend the offers from Barclays or the consortium.
"ABN AMRO will further engage with both parties with the aim of continuing to ensure a level playing field and minimising any of the uncertainties currently associated with the offers with a view to optimising the attractive alternatives available to ABN AMRO's shareholders," ABN said in a statement.
Barclays' offer is formally conditional on a recommendation from ABN, but sources have told Reuters that it was unlikely to pull out of the race as a result of the move, and could instead revise that requirement.
ABN's fate would be decided by shareholders, who would tender their shares to either bidder after formal offers are launched.
The RBS-led offer, which would result in a break-up of ABN, is more than 90 per cent in cash and adds up to 38.1 euros per ABN share at current market prices - against Barclays' bid at 34.7 euros per share.
Barclays sweetened its offer with a cash portion, as China Development Bank and Singapore's Temasek took stakes in the bank, but its offer remains mostly in shares, and therefore vulnerable to recent market turbulence.
ABN reported a net profit of 1.13 billion euros ($A1.82 billion) in the second quarter, compared with 1.216 billion euros ($A1.96 billion) a year earlier and the 1 billion euros average forecast in a Reuters survey of five analysts. The figures excluded discontinued operations.
Source: AAP and Reuters
Sunday, July 29, 2007
Housing supply research and data collection proposed
A housing supply research council would be established if Labor wins power in the upcoming Federal election, a summit in Canberra was told today.
"The whole objective there is simply to provide better data for us all because we think that is the best way which you can shape public policy into the future," Labor Leader Kevin Rudd told the ALP-organised meeting.
The council would include representatives from state and territory governments, local government, Treasury, Reserve Bank, the housing property and finance sectors, welfare and community housing sector, as well as relevant research institutes.
"We want the best brains around to get the total data picture right," Mr Rudd said.
He said he did not want the summit to become an opportunity to blame the Government for problems in housing affordability.
"We would like to try and do what we can, through this summit today, to get the housing affordability question right," he said.
Property experts, economists, academics and business leaders joined state housing ministers at the conference inside parliament house today.
"Most of us accept the proposition that we do have a housing affordability crisis in the country," Mr Rudd said.
Mr Rudd said those attending the summit had to consider both demand and supply factors that were affecting housing affordability.
Supply issues included the impact of taxes, charges and levies.
Other factors included local government infrastructure for new housing developments, streamlining development approval processes, attracting investors to the affordable housing sector, and dealing with other cost pressures such as the skills shortage.
"On the demand side, of course interest rates are the topic of the day," Mr Rudd said.
The summit will also consider the best way to help first-home buyers enter the market, including a proposal for a deposit scheme.
Mr Rudd said more than one million households were in housing stress through rent and mortgages.
The number of first-home buyers as a proportion of all property purchasers had fallen from 22 per cent in 1996 to about 17 per cent today.
"All these indicators ... point to the fact that we have an emerging housing affordability crisis," Mr Rudd said.
The crisis was exacerbated by the 187,000 people on public housing waiting lists, he said.
Acting NSW Housing Minister Linda Burney she said issues like negative gearing needed to be considered but there were other more pressing issues.
"The more important thing for us today is to make it very clear that the way in which state and commonwealth relations have operated over the past 10 or 11 years is unsatisfactory," she said.
The Victorian and Northern Territory ministers agreed negative gearing should be discussed at the meeting.
"There are a number of proposals that have been floated around tax treatment, both negative gearing and some incentives for superannuation funds to get involved," Victorian Housing Minister Richard Wynne said.
"Those options should be considered."
Source: AAP
"The whole objective there is simply to provide better data for us all because we think that is the best way which you can shape public policy into the future," Labor Leader Kevin Rudd told the ALP-organised meeting.
The council would include representatives from state and territory governments, local government, Treasury, Reserve Bank, the housing property and finance sectors, welfare and community housing sector, as well as relevant research institutes.
"We want the best brains around to get the total data picture right," Mr Rudd said.
He said he did not want the summit to become an opportunity to blame the Government for problems in housing affordability.
"We would like to try and do what we can, through this summit today, to get the housing affordability question right," he said.
Property experts, economists, academics and business leaders joined state housing ministers at the conference inside parliament house today.
"Most of us accept the proposition that we do have a housing affordability crisis in the country," Mr Rudd said.
Mr Rudd said those attending the summit had to consider both demand and supply factors that were affecting housing affordability.
Supply issues included the impact of taxes, charges and levies.
Other factors included local government infrastructure for new housing developments, streamlining development approval processes, attracting investors to the affordable housing sector, and dealing with other cost pressures such as the skills shortage.
"On the demand side, of course interest rates are the topic of the day," Mr Rudd said.
The summit will also consider the best way to help first-home buyers enter the market, including a proposal for a deposit scheme.
Mr Rudd said more than one million households were in housing stress through rent and mortgages.
The number of first-home buyers as a proportion of all property purchasers had fallen from 22 per cent in 1996 to about 17 per cent today.
"All these indicators ... point to the fact that we have an emerging housing affordability crisis," Mr Rudd said.
The crisis was exacerbated by the 187,000 people on public housing waiting lists, he said.
Acting NSW Housing Minister Linda Burney she said issues like negative gearing needed to be considered but there were other more pressing issues.
"The more important thing for us today is to make it very clear that the way in which state and commonwealth relations have operated over the past 10 or 11 years is unsatisfactory," she said.
The Victorian and Northern Territory ministers agreed negative gearing should be discussed at the meeting.
"There are a number of proposals that have been floated around tax treatment, both negative gearing and some incentives for superannuation funds to get involved," Victorian Housing Minister Richard Wynne said.
"Those options should be considered."
Source: AAP
Thursday, July 26, 2007
Wespac Boss says the big banks need scale to compete globally
Wespac Banking Corp chief executive David Morgan says Australia' so-called 'four pillars' banking policy is a 'woolly mammoth" that is creating a problem for the domestic economy.
Dr Morgan says it's time for the federal government to abolish the policy, which prevents the top four banks - Westpac, ANZ, National Australia Bank and Commonwealth Bank of Australia - from merging.
"While everyone else is getting on with life in the marketplace, the banks are commanded forever to be blocks of concrete or marble - or salt," he said.
"It's the 'Lot's life' banking policy," Dr Morgan added, referring to the story of Lot in the Bible.
"Set against banking consolidation worldwide and the globalisation of services, the policy is an anachronism, a woolly mammoth dug from the Siberian tundra and shipped still frozen to Australia as a structure for banking."
Mr Morgan said the banks were arteries of the Australian economy.
"And who wants pillars for arteries," he said.
"To put it bluntly, the Australian majors need scale to compete with global banks that are a growing presence here."
Dr Morgan, who will retire from the bank later this year, was speaking at a Trans-Tasman Business Circle lunch in Sydney.
To a question from the audience, Dr Morgan said he was more confident than he had ever been that the four pillars policy would be abolished.
"I think there is a reasonable chance that in the life of the next parliament, that policy will be relaxed," he said.
Dr Morgan was a senior official of the Federal Treasury before joining Westpac.
Source: AAP
Dr Morgan says it's time for the federal government to abolish the policy, which prevents the top four banks - Westpac, ANZ, National Australia Bank and Commonwealth Bank of Australia - from merging.
"While everyone else is getting on with life in the marketplace, the banks are commanded forever to be blocks of concrete or marble - or salt," he said.
"It's the 'Lot's life' banking policy," Dr Morgan added, referring to the story of Lot in the Bible.
"Set against banking consolidation worldwide and the globalisation of services, the policy is an anachronism, a woolly mammoth dug from the Siberian tundra and shipped still frozen to Australia as a structure for banking."
Mr Morgan said the banks were arteries of the Australian economy.
"And who wants pillars for arteries," he said.
"To put it bluntly, the Australian majors need scale to compete with global banks that are a growing presence here."
Dr Morgan, who will retire from the bank later this year, was speaking at a Trans-Tasman Business Circle lunch in Sydney.
To a question from the audience, Dr Morgan said he was more confident than he had ever been that the four pillars policy would be abolished.
"I think there is a reasonable chance that in the life of the next parliament, that policy will be relaxed," he said.
Dr Morgan was a senior official of the Federal Treasury before joining Westpac.
Source: AAP
August rate hike tipped due to increased inflation and housing sales increases
Mortagge rates could be on the way up again as soon as August, presenting Prime Minister John Howard with fresh political problems as housing affordability takes a tumble.
New inflation figures released yesterday came in at a higher than expected 1.2 per cent for the June quarter, sparking fears of an imminent rise. Annual inflation sits at 2.1 per cent, which is toward the bottom of the Reserve Bank's target range.
But the size of the increase - caused mainly by higher petrol and food prices, as well as rising rents - was likely to concern the bank's board.
Most economists agreed the price volatility would prompt a rates rise at the RBA's August meeting.
Mr Howard, who today celebrates his 68th birthday, suggested there was no need for an increase.
"What I'm saying to you and what is obvious is that it (inflation) is still well within that range,'' he said.
Home Buyer affordability to decline
A quarter of a percentage rise would push up the monthly loan repayment on a $300,000 mortgage by $50.
The increase would also be expected to flow through to the rental market .
Shadow treasurer Wayne Swan seized on the new inflation figures to warn householders were under growing financial pressure and the future was looking bleak.
"Apart from the possible implications for interest rates, mums and dads around the country will be concerned that the cost of the basics are going up and up,'' Mr Swan said.
The new inflation figures show in the three months to the end of June petrol prices rose 9 per cent, vegetables 6 per cent, rent 1.6 per cent while the cost of travel and computers fell.
The broad inflation rate of 1.2 per cent for the June quarter, and the core rate of 0.9 per cent, was well beyond market predictions.
Pain in the mortgage belt.
A rate hike could not come at a worse time for the Government as it struggles to peg back Labor's runaway lead in the polls.
Labor has made political capital out of declining affordability, including in the private rental market, and from the increasing cost of living.
Rental prices increased across all capital cities by 1.6 per cent, driven by continuing low vacancy rates.
Renewed speculation of an imminent interest rates rise dovetails conveniently with Opposition Leader Kevin Rudd's housing summit in Canberra today.
Labor remained tight-lipped yesterday on the possible outcomes of the meeting, which it says will examine the factors leading to higher prices and a lack of affordable rental housing.
Call to slash stamp duty
Treasurer Peter Costello called on the states to cut stamp duties on homes and release more land.
"Young homebuyers are paying more (stamp duty) than ever before . . . I expect an agreement to come out tomorrow from the Labor states to cut stamp duty,'' Mr Costello said.
Source: The Advertiser and The Courier-Mail
New inflation figures released yesterday came in at a higher than expected 1.2 per cent for the June quarter, sparking fears of an imminent rise. Annual inflation sits at 2.1 per cent, which is toward the bottom of the Reserve Bank's target range.
But the size of the increase - caused mainly by higher petrol and food prices, as well as rising rents - was likely to concern the bank's board.
Most economists agreed the price volatility would prompt a rates rise at the RBA's August meeting.
Mr Howard, who today celebrates his 68th birthday, suggested there was no need for an increase.
"What I'm saying to you and what is obvious is that it (inflation) is still well within that range,'' he said.
Home Buyer affordability to decline
A quarter of a percentage rise would push up the monthly loan repayment on a $300,000 mortgage by $50.
The increase would also be expected to flow through to the rental market .
Shadow treasurer Wayne Swan seized on the new inflation figures to warn householders were under growing financial pressure and the future was looking bleak.
"Apart from the possible implications for interest rates, mums and dads around the country will be concerned that the cost of the basics are going up and up,'' Mr Swan said.
The new inflation figures show in the three months to the end of June petrol prices rose 9 per cent, vegetables 6 per cent, rent 1.6 per cent while the cost of travel and computers fell.
The broad inflation rate of 1.2 per cent for the June quarter, and the core rate of 0.9 per cent, was well beyond market predictions.
Pain in the mortgage belt.
A rate hike could not come at a worse time for the Government as it struggles to peg back Labor's runaway lead in the polls.
Labor has made political capital out of declining affordability, including in the private rental market, and from the increasing cost of living.
Rental prices increased across all capital cities by 1.6 per cent, driven by continuing low vacancy rates.
Renewed speculation of an imminent interest rates rise dovetails conveniently with Opposition Leader Kevin Rudd's housing summit in Canberra today.
Labor remained tight-lipped yesterday on the possible outcomes of the meeting, which it says will examine the factors leading to higher prices and a lack of affordable rental housing.
Call to slash stamp duty
Treasurer Peter Costello called on the states to cut stamp duties on homes and release more land.
"Young homebuyers are paying more (stamp duty) than ever before . . . I expect an agreement to come out tomorrow from the Labor states to cut stamp duty,'' Mr Costello said.
Source: The Advertiser and The Courier-Mail
Tuesday, July 24, 2007
Former Queensland property marketeer is broke
Former property marketing tsar Chris Bilborough has been declared bankrupt after a tussle with the Australian Taxation Office.
Mr Bilborough, 41, was a key figure in the Gold Coast property industry in the late 1990s – but had run-ins with regulators and politicians.
He has recently been linked to a property deal involving a company of former Australian Test cricketer Craig McDermott.
He said he had been hit with a $1.2 million bill from an initial $350,000 tax assessment.
He said he offered a $500,000 compromise. "They rejected it," he said.
A federal court in May ruled against attempts to seek a review of the ATO's rejection of the compromise for a bill stemming from a 1997 tax assessment.
In August, the ATO rejected the compromise for reasons including a lack of information to support his claims of an inability to fully repay tax debts.
Mr Bilborough was a director of companies, including National Asset Planning Corporation and Markfair (trading as Investlend Australia), which were involved in property sales to interstate investors. Markfair offered financial advice.
He was named in Parliament several times since 1998, on one occasion accused of being behind "scams".
Fair Trading Minister Margaret Keech said last December her office had recovered $240,000 from Mr Bilborough.
Mr Bilborough yesterday pointed out one of his critics – former fair trading minister Merri Rose – had been jailed over blackmail but he would not answer queries about other politicians' comments.
He has fought some actions by regulators. He previously said he was "cleared of selling any overpriced properties" in a federal case.
In 2005, The Courier-Mail revealed his involvement in a firm promoting a planned Warwick estate.
The Courier-Mail on Saturday reported Markfair was named in a 2004 court action over the sale of a property from McDermott Projects (Nut Tree Grove) Pty Ltd, in which Mr McDermott was a director.
The documents contained allegations from the buyers' lawyers of unconscionable conduct, and that Markfair and/or marketeers Asset Management Group were agents and/or joint venture partners for McDermott Projects.
Mr McDermott said he was unaware of the case, or any link with Markfair or Asset Management Group. No defence was filed and the action was abandoned.
Source: Courier Mail
Mr Bilborough, 41, was a key figure in the Gold Coast property industry in the late 1990s – but had run-ins with regulators and politicians.
He has recently been linked to a property deal involving a company of former Australian Test cricketer Craig McDermott.
He said he had been hit with a $1.2 million bill from an initial $350,000 tax assessment.
He said he offered a $500,000 compromise. "They rejected it," he said.
A federal court in May ruled against attempts to seek a review of the ATO's rejection of the compromise for a bill stemming from a 1997 tax assessment.
In August, the ATO rejected the compromise for reasons including a lack of information to support his claims of an inability to fully repay tax debts.
Mr Bilborough was a director of companies, including National Asset Planning Corporation and Markfair (trading as Investlend Australia), which were involved in property sales to interstate investors. Markfair offered financial advice.
He was named in Parliament several times since 1998, on one occasion accused of being behind "scams".
Fair Trading Minister Margaret Keech said last December her office had recovered $240,000 from Mr Bilborough.
Mr Bilborough yesterday pointed out one of his critics – former fair trading minister Merri Rose – had been jailed over blackmail but he would not answer queries about other politicians' comments.
He has fought some actions by regulators. He previously said he was "cleared of selling any overpriced properties" in a federal case.
In 2005, The Courier-Mail revealed his involvement in a firm promoting a planned Warwick estate.
The Courier-Mail on Saturday reported Markfair was named in a 2004 court action over the sale of a property from McDermott Projects (Nut Tree Grove) Pty Ltd, in which Mr McDermott was a director.
The documents contained allegations from the buyers' lawyers of unconscionable conduct, and that Markfair and/or marketeers Asset Management Group were agents and/or joint venture partners for McDermott Projects.
Mr McDermott said he was unaware of the case, or any link with Markfair or Asset Management Group. No defence was filed and the action was abandoned.
Source: Courier Mail
Former Queensland property marketeer is broke
Former property marketing tsar Chris Bilborough has been declared bankrupt after a tussle with the Australian Taxation Office.
Mr Bilborough, 41, was a key figure in the Gold Coast property industry in the late 1990s – but had run-ins with regulators and politicians.
He has recently been linked to a property deal involving a company of former Australian Test cricketer Craig McDermott.
He said he had been hit with a $1.2 million bill from an initial $350,000 tax assessment.
He said he offered a $500,000 compromise. "They rejected it," he said.
A federal court in May ruled against attempts to seek a review of the ATO's rejection of the compromise for a bill stemming from a 1997 tax assessment.
In August, the ATO rejected the compromise for reasons including a lack of information to support his claims of an inability to fully repay tax debts.
Mr Bilborough was a director of companies, including National Asset Planning Corporation and Markfair (trading as Investlend Australia), which were involved in property sales to interstate investors. Markfair offered financial advice.
He was named in Parliament several times since 1998, on one occasion accused of being behind "scams".
Fair Trading Minister Margaret Keech said last December her office had recovered $240,000 from Mr Bilborough.
Mr Bilborough yesterday pointed out one of his critics – former fair trading minister Merri Rose – had been jailed over blackmail but he would not answer queries about other politicians' comments.
He has fought some actions by regulators. He previously said he was "cleared of selling any overpriced properties" in a federal case.
In 2005, The Courier-Mail revealed his involvement in a firm promoting a planned Warwick estate.
The Courier-Mail on Saturday reported Markfair was named in a 2004 court action over the sale of a property from McDermott Projects (Nut Tree Grove) Pty Ltd, in which Mr McDermott was a director.
The documents contained allegations from the buyers' lawyers of unconscionable conduct, and that Markfair and/or marketeers Asset Management Group were agents and/or joint venture partners for McDermott Projects.
Mr McDermott said he was unaware of the case, or any link with Markfair or Asset Management Group. No defence was filed and the action was abandoned.
Source: Courier Mail
Mr Bilborough, 41, was a key figure in the Gold Coast property industry in the late 1990s – but had run-ins with regulators and politicians.
He has recently been linked to a property deal involving a company of former Australian Test cricketer Craig McDermott.
He said he had been hit with a $1.2 million bill from an initial $350,000 tax assessment.
He said he offered a $500,000 compromise. "They rejected it," he said.
A federal court in May ruled against attempts to seek a review of the ATO's rejection of the compromise for a bill stemming from a 1997 tax assessment.
In August, the ATO rejected the compromise for reasons including a lack of information to support his claims of an inability to fully repay tax debts.
Mr Bilborough was a director of companies, including National Asset Planning Corporation and Markfair (trading as Investlend Australia), which were involved in property sales to interstate investors. Markfair offered financial advice.
He was named in Parliament several times since 1998, on one occasion accused of being behind "scams".
Fair Trading Minister Margaret Keech said last December her office had recovered $240,000 from Mr Bilborough.
Mr Bilborough yesterday pointed out one of his critics – former fair trading minister Merri Rose – had been jailed over blackmail but he would not answer queries about other politicians' comments.
He has fought some actions by regulators. He previously said he was "cleared of selling any overpriced properties" in a federal case.
In 2005, The Courier-Mail revealed his involvement in a firm promoting a planned Warwick estate.
The Courier-Mail on Saturday reported Markfair was named in a 2004 court action over the sale of a property from McDermott Projects (Nut Tree Grove) Pty Ltd, in which Mr McDermott was a director.
The documents contained allegations from the buyers' lawyers of unconscionable conduct, and that Markfair and/or marketeers Asset Management Group were agents and/or joint venture partners for McDermott Projects.
Mr McDermott said he was unaware of the case, or any link with Markfair or Asset Management Group. No defence was filed and the action was abandoned.
Source: Courier Mail
Wide Bay Building Society makes offer to buy MacKay Permanent Building Society
Building society Wide Bay Australia has launched a $46 million takeover offer for MacKay Permanent Building Society.
Wide Bay is offering Mackay shareholders $7.20 cash per share plus a fully franked dividend of 80 cents, or 0.6 of a Wide Bay share plus the 80 cent dividend.
"The combination of Wide Bay with Mackay Permanent would enhance our position as the largest financial institution based in fast growing Wide Bay, Central and North Queensland," Wide Bay chairman John Pressler said.
Bundaberg-based Wide Bay said it had already secured approval for its takeover proposal from 14.07 per cent of Mackay's shareholders.
In addition, Wide Bay currently has a 1.58 per cent holding in Mackay.
The acquisition is expected to be earnings per share accretive in the first year, Wide Bay said, and will be funded through existing facilities.
Wide Bay currently has 36 branches, with 34 of them in Queensland, and has total assets of $1.7 billion.
By 1036 AEST, Wide Bay shares were up 16 cents to $12.45. Mackay shares resume trading at 1100 AEST on Tuesday, having last traded at $7.
Source: AAP
Wide Bay is offering Mackay shareholders $7.20 cash per share plus a fully franked dividend of 80 cents, or 0.6 of a Wide Bay share plus the 80 cent dividend.
"The combination of Wide Bay with Mackay Permanent would enhance our position as the largest financial institution based in fast growing Wide Bay, Central and North Queensland," Wide Bay chairman John Pressler said.
Bundaberg-based Wide Bay said it had already secured approval for its takeover proposal from 14.07 per cent of Mackay's shareholders.
In addition, Wide Bay currently has a 1.58 per cent holding in Mackay.
The acquisition is expected to be earnings per share accretive in the first year, Wide Bay said, and will be funded through existing facilities.
Wide Bay currently has 36 branches, with 34 of them in Queensland, and has total assets of $1.7 billion.
By 1036 AEST, Wide Bay shares were up 16 cents to $12.45. Mackay shares resume trading at 1100 AEST on Tuesday, having last traded at $7.
Source: AAP
Thursday, July 19, 2007
Mortgage brokers and the mortgage industry targeted as the problem behind home loan defaults
Innovative MortgageBrokers, Mortgage Funders and the mortgage industry generally seem to be targets of a Howard Government inquiry, with recommenadations that home buyers be required to put up a deposit of 20 per cent. This would mean the end of first home buyers.
The parliamentary economics committee has called the snap inquiry into home lending as the number of people defaulting on mortgages continues to rise.
Despite low unemployment figures, economic growth and high consumer confidence, personal bankruptcies went up by 17 per cent in the 2006-07 financial year.
The chair of the committee, Bruce Baird, today said the inquiry would bring together banks, the Australian Securities and Investment Commission, the Reserve Bank of Australia (RBA), the banking regulator and consumer groups. [But no mortagge managers or mortgage brker groups who make up a growing part of the distribution of home loans.]
Discussions would focus on discovering the extent of the problem, the role of mortgage brokers and whether fierce competition between the banks was eroding prudent lending practices, Mr Baird said.
One outcome could be tighter controls on mortgage brokers, he said.
"Also some requirement there is adherence to a degree of equity, it's normally 20 per cent equity but if that's being eroded stricter controls can be brought in,'' Mr Baird said.
He said the inquiry would also consider whether the root of the problem lay with consumer attitudes.
"There's also the question of whether we have just normal greed coming in, where people want their McMansions.''
The RBA had been concerned for some time about the ease of securing home loan credit and the abandonment of the normal prudential requirement of 20 per cent equity, he said.
"We are seeing that eroded and we are seeing more of a 100 per cent of the value of a house being borrowed,'' he said.
Falling house prices in areas such as western Sydney left many homeowners with negative equity, saddling them with a debt if they were forced to sell due to financial shocks such as job loss or pregnancy, he said.
Debt explosion
The financial divide is growing between those struggling under debts and those with the resources to pay off their home, according to research by the Melbourne Institute.
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 Melbourne Institute research also 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: AAP
The parliamentary economics committee has called the snap inquiry into home lending as the number of people defaulting on mortgages continues to rise.
Despite low unemployment figures, economic growth and high consumer confidence, personal bankruptcies went up by 17 per cent in the 2006-07 financial year.
The chair of the committee, Bruce Baird, today said the inquiry would bring together banks, the Australian Securities and Investment Commission, the Reserve Bank of Australia (RBA), the banking regulator and consumer groups. [But no mortagge managers or mortgage brker groups who make up a growing part of the distribution of home loans.]
Discussions would focus on discovering the extent of the problem, the role of mortgage brokers and whether fierce competition between the banks was eroding prudent lending practices, Mr Baird said.
One outcome could be tighter controls on mortgage brokers, he said.
"Also some requirement there is adherence to a degree of equity, it's normally 20 per cent equity but if that's being eroded stricter controls can be brought in,'' Mr Baird said.
He said the inquiry would also consider whether the root of the problem lay with consumer attitudes.
"There's also the question of whether we have just normal greed coming in, where people want their McMansions.''
The RBA had been concerned for some time about the ease of securing home loan credit and the abandonment of the normal prudential requirement of 20 per cent equity, he said.
"We are seeing that eroded and we are seeing more of a 100 per cent of the value of a house being borrowed,'' he said.
Falling house prices in areas such as western Sydney left many homeowners with negative equity, saddling them with a debt if they were forced to sell due to financial shocks such as job loss or pregnancy, he said.
Debt explosion
The financial divide is growing between those struggling under debts and those with the resources to pay off their home, according to research by the Melbourne Institute.
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 Melbourne Institute research also 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: AAP
Monday, July 16, 2007
Mortgage and personal credit slowdown tipped as Australians are at "debt capacity" according to the Commonwealth Bank
Commonwealth Bank chief Ralph Norris says Australia's debt-laden household sector had reached its capacity for debt and a slowdown in borrowing is expected for personal finance, including credit cards, persoanl loans and mortgage home loans.
Mr Norris said hopes his business banking division will counter an expected slowdown in personal lending over the next year.
Speaking at a business lunch in Melbourne yesterday, Mr Norris said Australia's debt-laden household sector had reached its capacity for personal loans.
"If you look at the capacity for people to borrow, it's obviously getting to very high levels of capacity and I think there will be a tempering of demand in regard to personal lending," he said. "We have reached capacity for people to borrow which would see them start to reduce their appetite for additional borrowing.
"So we'll see a slowing in growth for personal lending and an increase in growth for business lending."
Since Mr Norris took over the reins of the bank in September 2005, one of his priorities has been to improve CBA's share of the business-lending market.
Rival major banks and niche lenders have eroded CBA's business customer market share from 22 per cent to 13 per cent in the last decade.
One of the big changes Mr Norris has made has put business bankers back into branches.
Despite the bearish outlook , the Australian Bureau of Statistics yesterday released data showing that personal finance commitments rose by 2.2 per cent in May.
On a seasonally adjusted basis, the value of personal lending reached $6.7 billion -- slightly above the trend figure of $6.6 billion.
The ABS said the rise was driven by a 5.6 per cent increase in revolving credit, which included credit cards and overdrafts, offsetting a 1.4 per cent decline in fixed-term loans.
CommSec equities economist Martin Arnold said the rise in personal finance indicated that consumers still had confidence in their financial position.
He noted monthly changes in lending finance figures were often volatile and best viewed over a longer period.
He said the rise in personal finance in May consolidated falls in the previous months.
Personal finance commitments dropped by about 0.5 per cent in April and 0.6 per cent in March.
Mr Arnold said commercial finance picked up during May as the robust business environment encouraged companies to invest in construction projects and the property market.
"Business lending makes up over 60 per cent of total lending, so it is an encouraging sign for future growth that businesses continue to expand their working capacity," he said.
Source: AAP
Mr Norris said hopes his business banking division will counter an expected slowdown in personal lending over the next year.
Speaking at a business lunch in Melbourne yesterday, Mr Norris said Australia's debt-laden household sector had reached its capacity for personal loans.
"If you look at the capacity for people to borrow, it's obviously getting to very high levels of capacity and I think there will be a tempering of demand in regard to personal lending," he said. "We have reached capacity for people to borrow which would see them start to reduce their appetite for additional borrowing.
"So we'll see a slowing in growth for personal lending and an increase in growth for business lending."
Since Mr Norris took over the reins of the bank in September 2005, one of his priorities has been to improve CBA's share of the business-lending market.
Rival major banks and niche lenders have eroded CBA's business customer market share from 22 per cent to 13 per cent in the last decade.
One of the big changes Mr Norris has made has put business bankers back into branches.
Despite the bearish outlook , the Australian Bureau of Statistics yesterday released data showing that personal finance commitments rose by 2.2 per cent in May.
On a seasonally adjusted basis, the value of personal lending reached $6.7 billion -- slightly above the trend figure of $6.6 billion.
The ABS said the rise was driven by a 5.6 per cent increase in revolving credit, which included credit cards and overdrafts, offsetting a 1.4 per cent decline in fixed-term loans.
CommSec equities economist Martin Arnold said the rise in personal finance indicated that consumers still had confidence in their financial position.
He noted monthly changes in lending finance figures were often volatile and best viewed over a longer period.
He said the rise in personal finance in May consolidated falls in the previous months.
Personal finance commitments dropped by about 0.5 per cent in April and 0.6 per cent in March.
Mr Arnold said commercial finance picked up during May as the robust business environment encouraged companies to invest in construction projects and the property market.
"Business lending makes up over 60 per cent of total lending, so it is an encouraging sign for future growth that businesses continue to expand their working capacity," he said.
Source: AAP
Becton Property Group to buy real estate assets of failed real estate investment group Fincorp
BectonProperty Group will acquire the property portfolio of collapsed funds manager and property investment firm Fincorp, after its offer was accepted by administrators KordaMentha.
Becton will acquire nine of the 10 Fincorp properties and invest up to $170 million to acquire a 10-year development pipeline, valued at more than $470 million.
The portfolio includes residential, retirement and commercial development sites and assets.
It includes the high profile Mernda town centre development site, 18 kilometres north of Melbourne.
The Sydney-based Fincorp went into administration in March owing its investors $201 million and its bank lenders a further $95 million.
The investment firm has more than 8,000 investors, whose average age is around 60.
As part of Becton deal, Fincorp investors will have the right to a cash out price of approximately 50 cents for each $1.00 originally invested in Fincorp.
They will also have the right to reinvest those proceeds in Becton's Office Fund at an effective price of approximately 55 cents for each $1.00.
The fund is a passive fund holding completed office properties.
In March, the administrators told aggrieved investors they could only expect to claw back 30 cents in the dollar.
Becton chief executive Hamish Macdonald said he hoped Fincorp investors would remain with the managed office fund.
"We believe that our offer provides significantly more value to Fincorp investors than would have been otherwise available from a straight liquidation,'' Mr Macdonald said.
"In this case, we were able to offer a significant 10 per cent premium to Fincorp first ranking/secured noteholders and have also provided a three-year capital guarantee if they choose to reinvest in the Becton Office Fund.''
The Fincorp portfolio includes two retirement village sites under development with a total of 379 dwellings in Hervey Bay and Mackay, Queensland.
As well, in Victoria, the portfolio holds a shopping centre site, the mixed-use site in Mernda and a completed bulky-goods property in Warrnambool.
Mr Macdonald said the acquisition will be earnings accretive for Becton from year one.
"The earnings accretion will be generated by the incremental increase in recurring earnings,'' he said.
"The development profits from the acquisition will strongly support our stated objective of producing $25 million of earnings before interest and tax per annum from our development and construction business.''
AAP
Becton will acquire nine of the 10 Fincorp properties and invest up to $170 million to acquire a 10-year development pipeline, valued at more than $470 million.
The portfolio includes residential, retirement and commercial development sites and assets.
It includes the high profile Mernda town centre development site, 18 kilometres north of Melbourne.
The Sydney-based Fincorp went into administration in March owing its investors $201 million and its bank lenders a further $95 million.
The investment firm has more than 8,000 investors, whose average age is around 60.
As part of Becton deal, Fincorp investors will have the right to a cash out price of approximately 50 cents for each $1.00 originally invested in Fincorp.
They will also have the right to reinvest those proceeds in Becton's Office Fund at an effective price of approximately 55 cents for each $1.00.
The fund is a passive fund holding completed office properties.
In March, the administrators told aggrieved investors they could only expect to claw back 30 cents in the dollar.
Becton chief executive Hamish Macdonald said he hoped Fincorp investors would remain with the managed office fund.
"We believe that our offer provides significantly more value to Fincorp investors than would have been otherwise available from a straight liquidation,'' Mr Macdonald said.
"In this case, we were able to offer a significant 10 per cent premium to Fincorp first ranking/secured noteholders and have also provided a three-year capital guarantee if they choose to reinvest in the Becton Office Fund.''
The Fincorp portfolio includes two retirement village sites under development with a total of 379 dwellings in Hervey Bay and Mackay, Queensland.
As well, in Victoria, the portfolio holds a shopping centre site, the mixed-use site in Mernda and a completed bulky-goods property in Warrnambool.
Mr Macdonald said the acquisition will be earnings accretive for Becton from year one.
"The earnings accretion will be generated by the incremental increase in recurring earnings,'' he said.
"The development profits from the acquisition will strongly support our stated objective of producing $25 million of earnings before interest and tax per annum from our development and construction business.''
AAP
Sunday, July 15, 2007
Are property prices, demand and mortgages to be driven by DIY superannuation?
Far from depressing the property market, the changes to super might just spur it along.
Already real estate is picking up in Brisbane, Melbourne and even in the inner city and top end parts of Sydney, a victim of past excesses, and also a growth in mortgage loans.
As far as I can gather, DIY super funds were being topped up as much by flicking share portfolios as flogging investment properties. In any case, if the super changes really were a problem for property, they won't be after Saturday.
The question is no longer when property prices will recover but how high they'll go. That alos applies for mortgages.
Is this the start of a new boom? Not if you believe economists. But I'm not so sure. Perhaps they need to look at the recent speech by the governor of the Reserve Bank, Glenn Stevens. You would have heard all about his hint of an interest rate rise in a few months, but it was his comment about the property market that was the real eye-opener.
He said: "The number of dwellings being built looks to be below what is normally thought to be underlying demand arising from population growth and household formation."
In Reservespeak, they're fighting words. He's saying there's a shortage of housing and developers should get on with it.
Demand is outstripping supply because of soaring wages, job growth and a pick-up in immigration.
Stevens went on to explain how difficult this shortage of housing will be to fix because the economy is running at full capacity: labour and materials to build houses will have to come from mining or infrastructure.
The point is for that to happen, construction costs would soar, which can only boost the value of existing properties.
Meanwhile, rents are rising because vacancy rates are the lowest in a lifetime, and the sharemarket is distinctly pricey, so all those cashed-up DIY super funds would have to be running the ruler over real estate.
Source: Sydney Morning Herald
Already real estate is picking up in Brisbane, Melbourne and even in the inner city and top end parts of Sydney, a victim of past excesses, and also a growth in mortgage loans.
As far as I can gather, DIY super funds were being topped up as much by flicking share portfolios as flogging investment properties. In any case, if the super changes really were a problem for property, they won't be after Saturday.
The question is no longer when property prices will recover but how high they'll go. That alos applies for mortgages.
Is this the start of a new boom? Not if you believe economists. But I'm not so sure. Perhaps they need to look at the recent speech by the governor of the Reserve Bank, Glenn Stevens. You would have heard all about his hint of an interest rate rise in a few months, but it was his comment about the property market that was the real eye-opener.
He said: "The number of dwellings being built looks to be below what is normally thought to be underlying demand arising from population growth and household formation."
In Reservespeak, they're fighting words. He's saying there's a shortage of housing and developers should get on with it.
Demand is outstripping supply because of soaring wages, job growth and a pick-up in immigration.
Stevens went on to explain how difficult this shortage of housing will be to fix because the economy is running at full capacity: labour and materials to build houses will have to come from mining or infrastructure.
The point is for that to happen, construction costs would soar, which can only boost the value of existing properties.
Meanwhile, rents are rising because vacancy rates are the lowest in a lifetime, and the sharemarket is distinctly pricey, so all those cashed-up DIY super funds would have to be running the ruler over real estate.
Source: Sydney Morning Herald
Saturday, July 14, 2007
Lowering credit statndards may create difficulties for some new home buyers
It is easier for homebuyers looking for a loan, but if things go wrong it can go hard on new home buyers struggling wit home repayments.
Australians taking advantage of fast easy cash loans are also risking increasing debt and insolvency.
Despite low unemployment figures, economic growth and high consumer confidence, personal bankruptcies went up by 17 per cent in the 2006-07 financial year.
David Tennant, chairman of the Australian Financial Counselling and Credit Reform Association, said more ordinary Australians were finding it difficult to make ends meet.
Over the last six months his Care Financial Counselling Service has recorded a ten per cent rise in people needing assistance.
"The debt explosion is not because people are necessarily leading an extravagant lifestyle it is because it has become much harder for ordinary households to make ends meet.
"The deeply disturbing trend ... is a subtle shift from low-income to now medium-low income households simply not having enough money to have the basic lifestyle."
Mr Tennant said it was a relief that housing affordability was now a national issue because his group had been trying to draw attention to it for years.
A spokeswoman from consumer advocacy group CHOICE said a drop in house prices also had inadvertently put borrowers in the red.
"It's very disturbing when people sell their house and still can't reach payments for the outstanding mortgage," she said.
"There is a huge amount of individual responsibility required but it is also very hard when people are presented with all these finance opportunities. People don't think something bad is going to happen and then someone falls ill or a car repair is required.
"Australian consumers are under a lot of pressure to buy homes, to have a family home. They are told they can have a dream home. It is good to have confidence but you can't extend yourself."
The spokeswoman said there were grave concerns with fast loans when there was only limited testing of borrowers' ability to pay.
Bob Cruickshanks, deputy officer receiver for the Insolvency and Trustee Service Australia, said financial institutions were relaxing their means tests because of greater competition.
"Super funds are awash with cash and when you look around in Sydney there aren't really big projects absorbing it, so there is more money available and greater competition for the smaller finance companies to compete for borrowers.
"But the Department of Fair Trading has been like a hawk stamping out dodgy credit companies," he said.
Source: AAP
Australians taking advantage of fast easy cash loans are also risking increasing debt and insolvency.
Despite low unemployment figures, economic growth and high consumer confidence, personal bankruptcies went up by 17 per cent in the 2006-07 financial year.
David Tennant, chairman of the Australian Financial Counselling and Credit Reform Association, said more ordinary Australians were finding it difficult to make ends meet.
Over the last six months his Care Financial Counselling Service has recorded a ten per cent rise in people needing assistance.
"The debt explosion is not because people are necessarily leading an extravagant lifestyle it is because it has become much harder for ordinary households to make ends meet.
"The deeply disturbing trend ... is a subtle shift from low-income to now medium-low income households simply not having enough money to have the basic lifestyle."
Mr Tennant said it was a relief that housing affordability was now a national issue because his group had been trying to draw attention to it for years.
A spokeswoman from consumer advocacy group CHOICE said a drop in house prices also had inadvertently put borrowers in the red.
"It's very disturbing when people sell their house and still can't reach payments for the outstanding mortgage," she said.
"There is a huge amount of individual responsibility required but it is also very hard when people are presented with all these finance opportunities. People don't think something bad is going to happen and then someone falls ill or a car repair is required.
"Australian consumers are under a lot of pressure to buy homes, to have a family home. They are told they can have a dream home. It is good to have confidence but you can't extend yourself."
The spokeswoman said there were grave concerns with fast loans when there was only limited testing of borrowers' ability to pay.
Bob Cruickshanks, deputy officer receiver for the Insolvency and Trustee Service Australia, said financial institutions were relaxing their means tests because of greater competition.
"Super funds are awash with cash and when you look around in Sydney there aren't really big projects absorbing it, so there is more money available and greater competition for the smaller finance companies to compete for borrowers.
"But the Department of Fair Trading has been like a hawk stamping out dodgy credit companies," he said.
Source: AAP
Monday, July 09, 2007
Mortgage rip off victims of Sample & Partners can claim compensation. Here's how.
A court ruling has found that Sample and Partners, a mortgage broker in three States misled borrowers on debt reduction schemes.
Sample and Partners, a mortgage broker exposed by "Money" for charging borrowers thousands of dollars in fees for a mortgage reduction scheme involving high-interest line-of-credit loans, may have to compensate borrowers following a court action.
But the NSW Consumer Credit Legal Centre's principal solicitor, Katherine Lane, says the mortgage broker should have been fined so a compensation fund could be established for borrowers. She says it is disappointing victims have to make a claim against the company in order to obtain compensation.
Federal Court orders obtained last month by the Australian Securities and Investments Commission found that George Matthew Sample (known as Matthew Sample) and Craig Kenneth Turrell deceived and misled borrowers about their mortgages and how quickly those loans could be paid off.
The court finding followed a three-year investigation by the regulator. Matthew Sample is principal and managing director of Sample and Partners, while Craig Turrell is general manager of the mortgage broking firm, which has offices in Sydney, Melbourne and Brisbane.
The scheme came with high fees and charges for line-of-credit loans that Sample and Partners promised could be repaid faster than a standard variable home loan.
Carolyn Bond, the co-chief executive of the Consumer Action Law Centre in Victoria, says: "Action by the regulator means that the industry is cleaning up its act a bit. You see less and less of these sort of loans on offer."
Bond says borrowers who were misled are entitled to compensation. "There's no reason why you shouldn't get funds covering fees and interest charges back."
ASIC's executive director of enforcement, Jan Redfern, says the court case sends a clear message to other mortgage brokerage firms marketing mortgage reduction schemes or line-of-credit loans that come with promises that the debt can be repaid quicker than debt on a standard, variable interest-rate mortgage. "It sets out clearly what we have found to be problematic or objectionable behaviour. The company has had to make undertakings to make good," she says.
The investigation by Money found interest rates on Sample and Partners' brokered home loans that were 0.6 to 1.5 per cent higher than a basic home loan. Fees for the debt reduction scheme ranged from $3000 to $8000 and involved line-of-credit loans.
After paying the high fees the original debts were enlarged and, coupled with higher interest rates, could not be paid off faster.
Unlike standard home loans, which require principal and interest repayments to reduce the debt, line-of-credit loans require interest payments only.
Lane says ordinary families have a lot of trouble paying off line-of-credit loans.
"At least with a normal home loan, it is forced saving. You have to make repayments. Five years after signing up for a line-of-credit loan you might not have paid anything off the loan," she says.
ASIC alleged that Sample and Partners' sales staff told borrowers that by switching to a Sample and Partners' loan they would save money and pay off their home loan sooner.
"But they failed to adequately explain that to obtain this benefit clients would need to make extra repayments," ASIC said in a statement released after the court's finding.
The court heard that Sample and Partners also used case studies that referred to people who had switched to Sample and Partners loans and saved money. These people did not exist.
The Sample and Partners brokers told borrowers they searched the market for the best possible loan when, in fact, they offered a limited range of home loans. Some borrowers also ended up with loans from a company called World Home Loans. Matthew Sample did not tell borrowers he was a director of Sample and Partners and a director and shareholder of World Home Loans Pty Ltd and World Home Loans Administration Service Pty Ltd.
The court declared the mortgage broker told clients that before they refinanced, it would consider their financial circumstances and whether or not they would benefit from changing loans.
Sample and Partners also told clients it had expertise to offer insurance advice and employed specialist staff including financial planners and solicitors when it did not.
The mortgage broker must write to all former clients within 30 days (of June 18) and tell them of the court order, and it must provide borrowers with documents to help them make a claim against the firm.
ASIC's Redfern says the court order includes the appointment to Sample and Partners of an independent compliance officer, who will monitor their handling of claims. The compliance officer will also report to ASIC on whether Sample and Partners is complying with the ASIC Act with regards to future clients.
The court orders prohibit Sample and Partners from engaging in this conduct in the future.
Sample and Partners agreed to the orders, which also involve the payment of ASIC's costs of $200,000.
"Choosing a home loan is likely to be one of the biggest financial decisions a person will make," Redfern says.
"Mortgage brokers, who are often relied upon to facilitate and help people through this process, have important responsibilities to ensure that the information they provide is accurate and truthful."
Sample and Partners' director of corporate services, Michael Crouch said in a written statement that "as a company we look forward to working with all regulators both state and federal to ensure ongoing compliance in our industry".
How to make a claim
The Consumer Action Law Centre in Victoria and the NSW Consumer Credit Legal Centre will help borrowers make a claim against Sample and Partners.
Their lawyers believe that borrowers should be able to mount a case to have fees and charges as well as high interest payments returned.
The only way to reduce a home loan faster is to make extra repayments - paying off as much as you can, as often as you can, on a low interest loan.
For help, phone the Consumer Credit Legal Centre in NSW on 1800 808 488 or in Victoria, phone the Consumer Action Law Centre (03) 9629 6300. For the court declarations on the case, visit ASIC's website at www.asic.gov.au.
Sample and Partners, a mortgage broker exposed by "Money" for charging borrowers thousands of dollars in fees for a mortgage reduction scheme involving high-interest line-of-credit loans, may have to compensate borrowers following a court action.
But the NSW Consumer Credit Legal Centre's principal solicitor, Katherine Lane, says the mortgage broker should have been fined so a compensation fund could be established for borrowers. She says it is disappointing victims have to make a claim against the company in order to obtain compensation.
Federal Court orders obtained last month by the Australian Securities and Investments Commission found that George Matthew Sample (known as Matthew Sample) and Craig Kenneth Turrell deceived and misled borrowers about their mortgages and how quickly those loans could be paid off.
The court finding followed a three-year investigation by the regulator. Matthew Sample is principal and managing director of Sample and Partners, while Craig Turrell is general manager of the mortgage broking firm, which has offices in Sydney, Melbourne and Brisbane.
The scheme came with high fees and charges for line-of-credit loans that Sample and Partners promised could be repaid faster than a standard variable home loan.
Carolyn Bond, the co-chief executive of the Consumer Action Law Centre in Victoria, says: "Action by the regulator means that the industry is cleaning up its act a bit. You see less and less of these sort of loans on offer."
Bond says borrowers who were misled are entitled to compensation. "There's no reason why you shouldn't get funds covering fees and interest charges back."
ASIC's executive director of enforcement, Jan Redfern, says the court case sends a clear message to other mortgage brokerage firms marketing mortgage reduction schemes or line-of-credit loans that come with promises that the debt can be repaid quicker than debt on a standard, variable interest-rate mortgage. "It sets out clearly what we have found to be problematic or objectionable behaviour. The company has had to make undertakings to make good," she says.
The investigation by Money found interest rates on Sample and Partners' brokered home loans that were 0.6 to 1.5 per cent higher than a basic home loan. Fees for the debt reduction scheme ranged from $3000 to $8000 and involved line-of-credit loans.
After paying the high fees the original debts were enlarged and, coupled with higher interest rates, could not be paid off faster.
Unlike standard home loans, which require principal and interest repayments to reduce the debt, line-of-credit loans require interest payments only.
Lane says ordinary families have a lot of trouble paying off line-of-credit loans.
"At least with a normal home loan, it is forced saving. You have to make repayments. Five years after signing up for a line-of-credit loan you might not have paid anything off the loan," she says.
ASIC alleged that Sample and Partners' sales staff told borrowers that by switching to a Sample and Partners' loan they would save money and pay off their home loan sooner.
"But they failed to adequately explain that to obtain this benefit clients would need to make extra repayments," ASIC said in a statement released after the court's finding.
The court heard that Sample and Partners also used case studies that referred to people who had switched to Sample and Partners loans and saved money. These people did not exist.
The Sample and Partners brokers told borrowers they searched the market for the best possible loan when, in fact, they offered a limited range of home loans. Some borrowers also ended up with loans from a company called World Home Loans. Matthew Sample did not tell borrowers he was a director of Sample and Partners and a director and shareholder of World Home Loans Pty Ltd and World Home Loans Administration Service Pty Ltd.
The court declared the mortgage broker told clients that before they refinanced, it would consider their financial circumstances and whether or not they would benefit from changing loans.
Sample and Partners also told clients it had expertise to offer insurance advice and employed specialist staff including financial planners and solicitors when it did not.
The mortgage broker must write to all former clients within 30 days (of June 18) and tell them of the court order, and it must provide borrowers with documents to help them make a claim against the firm.
ASIC's Redfern says the court order includes the appointment to Sample and Partners of an independent compliance officer, who will monitor their handling of claims. The compliance officer will also report to ASIC on whether Sample and Partners is complying with the ASIC Act with regards to future clients.
The court orders prohibit Sample and Partners from engaging in this conduct in the future.
Sample and Partners agreed to the orders, which also involve the payment of ASIC's costs of $200,000.
"Choosing a home loan is likely to be one of the biggest financial decisions a person will make," Redfern says.
"Mortgage brokers, who are often relied upon to facilitate and help people through this process, have important responsibilities to ensure that the information they provide is accurate and truthful."
Sample and Partners' director of corporate services, Michael Crouch said in a written statement that "as a company we look forward to working with all regulators both state and federal to ensure ongoing compliance in our industry".
How to make a claim
The Consumer Action Law Centre in Victoria and the NSW Consumer Credit Legal Centre will help borrowers make a claim against Sample and Partners.
Their lawyers believe that borrowers should be able to mount a case to have fees and charges as well as high interest payments returned.
The only way to reduce a home loan faster is to make extra repayments - paying off as much as you can, as often as you can, on a low interest loan.
For help, phone the Consumer Credit Legal Centre in NSW on 1800 808 488 or in Victoria, phone the Consumer Action Law Centre (03) 9629 6300. For the court declarations on the case, visit ASIC's website at www.asic.gov.au.
ANZ bank buys 10% stake in Vietnamese bank
ANZ Banking Group Ltd has continued its widespread geographical expansion in Asia, acquiring a 10 per cent stake in Vietnam investment bank Saigon Securities Incorporation for $US88 million ($102 million).
It is the second acquisition in Vietnam for Australia's third largest bank, which took a 10 per cent stake in retail bank Sacombank in the market in 2005 for $US27 million ($A31.52 million).
Established in 2002, Saigon Securities is Vietnam's largest broker, holding a 27 per cent slice of the market.
It provides broking and investment banking services like corporate advisory, financing and research to more than 30,000 customer accounts.
ANZ set up its first ANZ-branded Vietnamese branch in Hanoi in 1993 and opened a second branch in Ho Chi Minh City in 1996.
Both continue to cater to Australian travellers and businesses coming into Vietnam.
"ANZ was one of the first foreign banks to open in Vietnam and regards expansion in the country as one of its highest priorities," ANZ said.
ANZ and Saigon Securities had already been cooperating for some time on corporate bond issues for large Vietnamese companies, buoyed by a Vietnamese economy that has averaged GDP growth of more than 7.5 per cent in the last five years.
ANZ has made no secret of its plans to expand into Asia.
Outgoing chief executive John McFarlane said in April ANZ's acquisition priorities lay in Asia because opportunities were limited in Australia.
In November 2006, ANZ paid $383 million for an initial 13.5 per cent stake in Malaysia's fifth-largest bank, AMMB Holdings Berhad.
That same month, ANZ disclosed that it had acquired a 19.9 per cent interest in China's Shanghai Rural Commercial Bank (SRCB) for $328 million.
In March this year, ANZ took a 60 per cent stake in a Laotian bank.
ANZ has announced its intention to expand its international franchise in Malaysia, China, Guam and Laos.
ANZ also is interested in India and Thailand.
ANZ rival Commonwealth Bank of Australia Ltd is also active in the region, currently holding interests in the Hangzhou City Commercial Bank and Jinan City Commercial Bank in China.
It also has an Indonesian subsidiary, PT Bank Commonwealth.
Source: AAP
It is the second acquisition in Vietnam for Australia's third largest bank, which took a 10 per cent stake in retail bank Sacombank in the market in 2005 for $US27 million ($A31.52 million).
Established in 2002, Saigon Securities is Vietnam's largest broker, holding a 27 per cent slice of the market.
It provides broking and investment banking services like corporate advisory, financing and research to more than 30,000 customer accounts.
ANZ set up its first ANZ-branded Vietnamese branch in Hanoi in 1993 and opened a second branch in Ho Chi Minh City in 1996.
Both continue to cater to Australian travellers and businesses coming into Vietnam.
"ANZ was one of the first foreign banks to open in Vietnam and regards expansion in the country as one of its highest priorities," ANZ said.
ANZ and Saigon Securities had already been cooperating for some time on corporate bond issues for large Vietnamese companies, buoyed by a Vietnamese economy that has averaged GDP growth of more than 7.5 per cent in the last five years.
ANZ has made no secret of its plans to expand into Asia.
Outgoing chief executive John McFarlane said in April ANZ's acquisition priorities lay in Asia because opportunities were limited in Australia.
In November 2006, ANZ paid $383 million for an initial 13.5 per cent stake in Malaysia's fifth-largest bank, AMMB Holdings Berhad.
That same month, ANZ disclosed that it had acquired a 19.9 per cent interest in China's Shanghai Rural Commercial Bank (SRCB) for $328 million.
In March this year, ANZ took a 60 per cent stake in a Laotian bank.
ANZ has announced its intention to expand its international franchise in Malaysia, China, Guam and Laos.
ANZ also is interested in India and Thailand.
ANZ rival Commonwealth Bank of Australia Ltd is also active in the region, currently holding interests in the Hangzhou City Commercial Bank and Jinan City Commercial Bank in China.
It also has an Indonesian subsidiary, PT Bank Commonwealth.
Source: AAP
Saturday, July 07, 2007
Property Investors stand to lose half a billion dollars
18,000 investors stand to lose half a billion dollars.
Many Bridgecorp investors knew of risks: analyst (AM) Related Story: Bridgecorp collapse a 'wake-up call' for financial services With the full extent of this week's collapse of the Bridgecorp property group yet to become apparent, it has emerged that many investors were at least partly aware of the company's problems and knew the risks they were taking.
Investment analysts in New Zealand had long regarded Bridgecorp as a ticking time bomb - simply because its troubled property ventures particularly in Australia and Fiji have been disclosed in prospectuses.
But about 18,000 investors on both sides of the Tasman who did not heed the fine print now stand to lose half a billion dollars.
One veteran analyst who had flagged the Bridgecorp risk is Brian Gaynor of Milford Asset Management, and he spoke with our business editor Peter Ryan.
"A lot of investors were very much aware, but mainly I guess equity investors," he said.
"[But] it seems that the fixed interest investors were disconnected. They didn't seem to pay any attention to the company's share price, which was indicating that Bridgecorp was at risk and it did have some problems.
"So it was only the mum and pop investors who put their money into Bridgecorp, who didn't seem to understand that a low share price was indicative of a company that had problems."
Bridgecorp's interest rate wasn't actually that much more than what you would get by going with a traditional bank. Is that surprising?
"No, well that's certainly a characteristic in New Zealand, where one could argue that Bridgecorp's interest rates were very low given the risk.
"You know, the prospectus had pretty full disclosure. I've got to say that if one is critical of Bridgecorp, one can't be critical of its level of disclosure.
"One would've thought, given that, investors would have demanded much higher interest rates, but they were quite willing to invest in the company, which had well-identified problems at pretty low interest rates, not that much above what the major banks were offering in New Zealand.
"Admittedly, the disclosure was quite complicated, but if one read through the prospectus it was all very clear. But it does seem that most people just didn't pay much attention to it."
Any thoughts about the level of bad news creditors could receive at the meeting next week?
"We are aware of probably up to 15 per cent of the company's assets, which are going to be very difficult to get back.
"Given the fact that only 30 per cent of Bridgecorp's lending was secured against first mortgages, one would imagine that there will be more bad news as well.
"So I don't think investors will get an awful lot of very positive news next week."
Many Bridgecorp investors knew of risks: analyst (AM) Related Story: Bridgecorp collapse a 'wake-up call' for financial services With the full extent of this week's collapse of the Bridgecorp property group yet to become apparent, it has emerged that many investors were at least partly aware of the company's problems and knew the risks they were taking.
Investment analysts in New Zealand had long regarded Bridgecorp as a ticking time bomb - simply because its troubled property ventures particularly in Australia and Fiji have been disclosed in prospectuses.
But about 18,000 investors on both sides of the Tasman who did not heed the fine print now stand to lose half a billion dollars.
One veteran analyst who had flagged the Bridgecorp risk is Brian Gaynor of Milford Asset Management, and he spoke with our business editor Peter Ryan.
"A lot of investors were very much aware, but mainly I guess equity investors," he said.
"[But] it seems that the fixed interest investors were disconnected. They didn't seem to pay any attention to the company's share price, which was indicating that Bridgecorp was at risk and it did have some problems.
"So it was only the mum and pop investors who put their money into Bridgecorp, who didn't seem to understand that a low share price was indicative of a company that had problems."
Bridgecorp's interest rate wasn't actually that much more than what you would get by going with a traditional bank. Is that surprising?
"No, well that's certainly a characteristic in New Zealand, where one could argue that Bridgecorp's interest rates were very low given the risk.
"You know, the prospectus had pretty full disclosure. I've got to say that if one is critical of Bridgecorp, one can't be critical of its level of disclosure.
"One would've thought, given that, investors would have demanded much higher interest rates, but they were quite willing to invest in the company, which had well-identified problems at pretty low interest rates, not that much above what the major banks were offering in New Zealand.
"Admittedly, the disclosure was quite complicated, but if one read through the prospectus it was all very clear. But it does seem that most people just didn't pay much attention to it."
Any thoughts about the level of bad news creditors could receive at the meeting next week?
"We are aware of probably up to 15 per cent of the company's assets, which are going to be very difficult to get back.
"Given the fact that only 30 per cent of Bridgecorp's lending was secured against first mortgages, one would imagine that there will be more bad news as well.
"So I don't think investors will get an awful lot of very positive news next week."
Tuesday, June 05, 2007
Sydney robbed of Monopoly money
THE BAROSSA Valley has taken the top spot in the new Australian version of Monopoly, nudging out some of the nation's most recognised landmarks.
The new Australian “Here and Now” version of the famous Monopoly board was launched this morning, with the Barossa Valley and Adelaide taking residency in the highly sought-after dark-blue property spaces.
While the “Mayfair” space could be bought by players in the original version of the game for $400, players would have to fork out $4 million in Monopoly money to buy the Barossa Valley property.
Barossa’s head of tourism Julian Maul said the placement was a great coup for the South Australian region.
“Monopoly is Australia’s and the world’s best loved game and we have no doubt that this will lift the profile of our beautiful region and be a boost for tourism,” Mr Maul said.
The places on the board were decided in a nationwide poll which recorded nearly 17 million votes earlier this year.
South Australia recorded the largest number of votes with about eight million wanting their favourite landmark in the game.
More than two million of those votes were in favour of having the Barossa Valley as the most expensive property on the board.
The traditional boot, top-hat and dog tokens were also replaced with a ute, surfboard and thongs in the new game.
Western Australian centres Kalgoorlie, Broome and Perth claimed the slightly less expensive green squares, while Victoria’s Sovereign Hill, the Great Ocean Road and Melbourne landed on the yellow squares.
Queensland’s Sunshine Coast and the Great Barrier Reef were placed in the cheapest squares in the game, after a late surge of votes for ACT landmarks Anzac Parade, Lake Burley Griffin and Cotter Reserve.
But the nation’s biggest city, Sydney, didn’t receive enough support from voters and failed to claim a spot on the board, leaving Broken Hill, Tamworth and the Snowy Mountains to represent New South Wales.
Tasmania’s Launceston, Cradle Mountain and Hobart; along with the Northern Territory’s Katherine Gorge, Devils Marbles and Kakadu also made it into the game.
Hasbro’s marketing manager Amanda Blackhall said that although it was the first time in 25 years that the board game maker had revised an Australian edition, the results of the vote were unexpected.
“While the somewhat surprising results will no doubt be disappointing to those that didn’t make it onto the board, there are no real losers in those that did,” Ms Blackhall said.
“To secure any one of the spots on the new Australian board of the world’s most famous game is a great achievement.”
Source: AAP
The new Australian “Here and Now” version of the famous Monopoly board was launched this morning, with the Barossa Valley and Adelaide taking residency in the highly sought-after dark-blue property spaces.
While the “Mayfair” space could be bought by players in the original version of the game for $400, players would have to fork out $4 million in Monopoly money to buy the Barossa Valley property.
Barossa’s head of tourism Julian Maul said the placement was a great coup for the South Australian region.
“Monopoly is Australia’s and the world’s best loved game and we have no doubt that this will lift the profile of our beautiful region and be a boost for tourism,” Mr Maul said.
The places on the board were decided in a nationwide poll which recorded nearly 17 million votes earlier this year.
South Australia recorded the largest number of votes with about eight million wanting their favourite landmark in the game.
More than two million of those votes were in favour of having the Barossa Valley as the most expensive property on the board.
The traditional boot, top-hat and dog tokens were also replaced with a ute, surfboard and thongs in the new game.
Western Australian centres Kalgoorlie, Broome and Perth claimed the slightly less expensive green squares, while Victoria’s Sovereign Hill, the Great Ocean Road and Melbourne landed on the yellow squares.
Queensland’s Sunshine Coast and the Great Barrier Reef were placed in the cheapest squares in the game, after a late surge of votes for ACT landmarks Anzac Parade, Lake Burley Griffin and Cotter Reserve.
But the nation’s biggest city, Sydney, didn’t receive enough support from voters and failed to claim a spot on the board, leaving Broken Hill, Tamworth and the Snowy Mountains to represent New South Wales.
Tasmania’s Launceston, Cradle Mountain and Hobart; along with the Northern Territory’s Katherine Gorge, Devils Marbles and Kakadu also made it into the game.
Hasbro’s marketing manager Amanda Blackhall said that although it was the first time in 25 years that the board game maker had revised an Australian edition, the results of the vote were unexpected.
“While the somewhat surprising results will no doubt be disappointing to those that didn’t make it onto the board, there are no real losers in those that did,” Ms Blackhall said.
“To secure any one of the spots on the new Australian board of the world’s most famous game is a great achievement.”
Source: AAP
Monday, May 28, 2007
GE Money profits down as bad debt grows
In a clear sign that credit conditions have taken a turn for the worse, a blowout in bad debts has resulted in a profit slump for the local consumer and business finance operations of GE
Loan impairment losses for GE Capital Finance Australasia, which bought AGC from Westpac five years ago, jumped 54 per cent from $185 million to $285 million.
Along with a higher tax bill, this contributed to a 31 per cent slide in net profit from $159 million to $109 million.
The GE division, with total loans and advances of $13 billion, up from $12 billion, represents only part of the fast-growing group in Australia.
Apart from AGC, the unit includes credit-card services, the Custom Fleet leasing and fleet management business purchased from National Australia Bank for $550 million, and general and life insurance activities. It does not include Wizard Home Loans.
GE representatives were unavailable for comment on the accounts, lodged yesterday with the Australian Securities and Investments Commission.
However, the GE Capital Finance numbers are consistent with warnings from the nation's big-bank chief executives in the recent interim profit reporting season that the credit cycle had turned, with stresses appearing in unsecured lending and credit-card operations, in particular.
ANZ boss John McFarlane said he expected provisions to be higher in the second half, with the first half unusually low due to recoveries.
NAB chief executive John Stewart said he was most concerned about the consumer space.
"The consumer is getting overextended with debt in certain pockets and that will always come out in danger areas like credit cards and unsecured lending," Mr Stewart said.
JP Morgan banking analyst Brian Johnson said yesterday personal lending loss rates were rising "quite dramatically", as shown by provisions at the GE unit rising to 219 basis points (as a percentage of total loans and advances).
Comparative rates for the big-four banks were far lower, at less than 20 basis points, but this was because of their massive, low-risk home lending books.
Mr Johnson estimated credit-card losses were running at about 260 basis points.
"Westpac's sale of AGC is now shown to be a pretty good decision, despite the short-term dilution in earnings per share at the time," he said.
"The banking industry is now exiting the optimal part of the cycle, and things will get worse from here."
GE's tax bill in 2006 was sharply higher, up from $18 million to $70 million. Unlike 2005, when it took a $39 million benefit from paying too much tax previously, the business had to stump up an extra $6 million.
Total assets at the end of last year came to $17.1 billion, up from $14.5 billion.
Finance income was relatively steady at $1.62 billion, but non-interest income doubled from $387 million to $767 million.
The biggest contributor was operating lease rental income, largely from Custom Fleet, which surged from $74 million to $223 million.
Custom Fleet contributed $167 million in revenue and a net loss of $2 million to the group from August 1 last year.
The total asset base for the GE group in Australia is estimated to be about $40 billion, up from $8 billion five years ago.
GE Capital Finance directors said they expected to grow the business further this year.
Source: Australian
Loan impairment losses for GE Capital Finance Australasia, which bought AGC from Westpac five years ago, jumped 54 per cent from $185 million to $285 million.
Along with a higher tax bill, this contributed to a 31 per cent slide in net profit from $159 million to $109 million.
The GE division, with total loans and advances of $13 billion, up from $12 billion, represents only part of the fast-growing group in Australia.
Apart from AGC, the unit includes credit-card services, the Custom Fleet leasing and fleet management business purchased from National Australia Bank for $550 million, and general and life insurance activities. It does not include Wizard Home Loans.
GE representatives were unavailable for comment on the accounts, lodged yesterday with the Australian Securities and Investments Commission.
However, the GE Capital Finance numbers are consistent with warnings from the nation's big-bank chief executives in the recent interim profit reporting season that the credit cycle had turned, with stresses appearing in unsecured lending and credit-card operations, in particular.
ANZ boss John McFarlane said he expected provisions to be higher in the second half, with the first half unusually low due to recoveries.
NAB chief executive John Stewart said he was most concerned about the consumer space.
"The consumer is getting overextended with debt in certain pockets and that will always come out in danger areas like credit cards and unsecured lending," Mr Stewart said.
JP Morgan banking analyst Brian Johnson said yesterday personal lending loss rates were rising "quite dramatically", as shown by provisions at the GE unit rising to 219 basis points (as a percentage of total loans and advances).
Comparative rates for the big-four banks were far lower, at less than 20 basis points, but this was because of their massive, low-risk home lending books.
Mr Johnson estimated credit-card losses were running at about 260 basis points.
"Westpac's sale of AGC is now shown to be a pretty good decision, despite the short-term dilution in earnings per share at the time," he said.
"The banking industry is now exiting the optimal part of the cycle, and things will get worse from here."
GE's tax bill in 2006 was sharply higher, up from $18 million to $70 million. Unlike 2005, when it took a $39 million benefit from paying too much tax previously, the business had to stump up an extra $6 million.
Total assets at the end of last year came to $17.1 billion, up from $14.5 billion.
Finance income was relatively steady at $1.62 billion, but non-interest income doubled from $387 million to $767 million.
The biggest contributor was operating lease rental income, largely from Custom Fleet, which surged from $74 million to $223 million.
Custom Fleet contributed $167 million in revenue and a net loss of $2 million to the group from August 1 last year.
The total asset base for the GE group in Australia is estimated to be about $40 billion, up from $8 billion five years ago.
GE Capital Finance directors said they expected to grow the business further this year.
Source: Australian
Wednesday, May 23, 2007
US Mortgage Brokers and Mortgage Brokers blame each other for the sub-prime meltdown
It got nasty between mortgage bankers and brokers were at loggerheads Tuesday over who's to blame for the housing market's woes.
[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.
Source: Forbes and AP
[The Mortgage Bankers seemed to have "lost their rag" by trying to infer that Mortgage Brokers were somehow to blame for the difficulties that some people have found themselves in by taking on sub prime loan arrangements. After all who determined Mortage Brokers compensation as commission, who pays the commission, and who verifies the facts of the loans before issuing documents? And don't the Mortgage Bankers make money on sub-prime loan mortgages? If not why are they in the business? Surely the Mortgage Bankers have the ultimate say, and so should be ultimately responsible and accountable. ]
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.
Amid increasing evidence of financial distress for homeowners with weak, or sub prime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.
"Unethical people, they're responsible for this mess," Robbins said. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the sub prime situation we find ourselves in today."
Harry Dinham, president of the brokers' group, added that congressional hearings have shown that "most residential mortgage loans are quickly sold into the secondary market - in fact most lenders are really just brokering the transaction but afraid or ashamed to admit it," he added.
In a lunchtime speech at the National Press Club, Robbins called for a national licensing system for mortgage brokers, which would help weed out "scam artists."
The industry's woes are confined to a small segment of the market, he said. About 5 percent of homeowners have sub prime adjustable-rate loans that feature low "teaser" rates which can move sharply higher later. He estimates about half of those homeowners will be able to avoid default or foreclosure. If so, foreclosures among sub prime borrowers will amount to 0.25 percent of U.S. homeowners, Robbins said.
"No seismic financial occurrence is about to overwhelm the U.S. economy," he said.
Yet RealtyTrac Inc., an industry research firm, said last week that mortgage lenders foreclosed on 62 percent more U.S. homes in April than a year ago.
Home prices are falling too. The national median existing single-family home price in the first quarter was $212,300, down 1.8 percent from a year ago when the median price was $216,100, according to the National Association of Realtors. The median is a typical market price where half the homes sold for more and half the homes sold for less.
Earlier this month, Sen. Charles Schumer, D-N.Y. and two other senators introduced a bill that would mandate tougher federal standards for mortgage lenders. No hearing date has been set and the bill is under review by the Committee on Banking, Housing and Urban Affairs. House lawmakers are talking about introducing their own reform bill this summer.
Robbins warned against an overreaction by lawmakers that could cause the country to "revert to a time when without perfect credit you couldn't buy a home."
His speech comes a day after the Mortgage Bankers Association and four other industry trade groups banking industry trade groups endorsed mortgage reform principles.
Any legislation or new regulations should focus on lenders only being permitted to issue high-risk, home loans - if they "reasonably believe" at the time the loan is made that borrowers have the ability to repay, the statement said. Mortgage terms should be "clearly disclosed" to consumers, and estimates of monthly payments that could quickly jump in later years should be made clearer, the groups said.
Banks say they are already stepping up efforts to assist borrowers who face default or foreclosure and tightening loan standards.
Federal Reserve Chairman Ben Bernanke last week said the central bank is considering tougher rules to reduce abusive home loan practices even though he believes the economy should escape without significant harm from the problems in the sub prime mortgage market.
In March, the Fed and the other four federal agencies that regulate banks, thrifts and credit unions proposed guidelines that call for strict evaluations of a borrower's ability to repay and caution when lenders make sub prime mortgage loans.
The guidelines have not yet been made final. The Fed plans a mid-June hearing on ways to curb abusive lending practices.
Source: Forbes and AP
Tuesday, May 22, 2007
Mortgage foreclosures four times higher than reported
The number of home foreclosures around the nation is up to four times higher than reported figures show, because lenders are disguising the nature of forced sales to prop up property prices.
Australia's biggest private debt collector, Prushka, yesterday said about three-quarters of sales forced by bank and non-bank lenders were co-ordinated with the consent of home owners, meaning they were not recorded in court repossession figures.
"By far the most popular way for lenders is to sell the property with the consent of the borrower to avoid advertising the property as a forced sale," Prushka chief executive Roger Mendelson said.
"The idea is to work with the seller because if they sell the property as a mortgagee in possession that will slaughter the price because you're going to attract the bargain hunters."
Mr Mendelson said statements by Peter Costello yesterday that Australia had a low home loan "default rate" - where borrowers can't meet mortgage repayments - failed to address the impact of increasing unreported levels of repossessions.
During a discussion about US default rates hitting an all-time high in the first quarter of 2007, the Treasurer had told Macquarie Regional Radio: "The default rate in Australia is much, much lower than it is in the US ... in fact, we have one of the lowest default rates in the world."
Experts said rising interest rates, coupled with the prevalence of low-documentation loans that do not force borrowers to disclose their income, had caused a spike in mortgage defaults in Australia.
Ian Graham, chief executive of PMI Mortgage Insurance, which insures about one million home loans, said Australia had no register for compiling total home repossessions.
"We would like to see a register introduced - I think the Reserve Bank would be one body in particular that would benefit from more complete data," Mr Graham said.
State "writs of possession" registers record only sales where lenders are forced to apply for repossession orders.
Sydney's outer western suburbs are being hardest hit by the surge in repossessions.
In NSW, 5363 writs of possession were issued last year - up 10 per cent on 2005.
Figures from the Victorian Supreme Court show there were 2791 repossession claims lodged last year, up from 2578 in 2005. The figure has more than doubled since 2003, when there were 1225.
"In southwest, west and northwest Sydney, property prices are weakest and in forced-sale situations property price declines of between 20 and 25 per cent are not unusual," Mr Graham said.
Dara Dhillon, principal of Dhillon Real Estate in Ingleburn in Sydney's outer southwest, said 90 per cent of properties coming to the market were forced sales, and the number of homes hitting the market was rising.
"It's actually getting worse by the month - in one family I was working with, the elderly mother had to return to work to keep a roof over their heads," he said.
But he said that with high employment and healthy wages growth, it was last year's interest rate rises and lax lending policies of non-bank lenders - especially "low-doc" loans where borrowers are not required to prove their income - that were to blame for the current fallout.
"It's a joke - if it was my money I wouldn't lend it but I believe lenders are still doing it," he said. "Low-doc, no-doc, whatever doc - doc doesn't even come into the picture."
Source: The Australian
Australia's biggest private debt collector, Prushka, yesterday said about three-quarters of sales forced by bank and non-bank lenders were co-ordinated with the consent of home owners, meaning they were not recorded in court repossession figures.
"By far the most popular way for lenders is to sell the property with the consent of the borrower to avoid advertising the property as a forced sale," Prushka chief executive Roger Mendelson said.
"The idea is to work with the seller because if they sell the property as a mortgagee in possession that will slaughter the price because you're going to attract the bargain hunters."
Mr Mendelson said statements by Peter Costello yesterday that Australia had a low home loan "default rate" - where borrowers can't meet mortgage repayments - failed to address the impact of increasing unreported levels of repossessions.
During a discussion about US default rates hitting an all-time high in the first quarter of 2007, the Treasurer had told Macquarie Regional Radio: "The default rate in Australia is much, much lower than it is in the US ... in fact, we have one of the lowest default rates in the world."
Experts said rising interest rates, coupled with the prevalence of low-documentation loans that do not force borrowers to disclose their income, had caused a spike in mortgage defaults in Australia.
Ian Graham, chief executive of PMI Mortgage Insurance, which insures about one million home loans, said Australia had no register for compiling total home repossessions.
"We would like to see a register introduced - I think the Reserve Bank would be one body in particular that would benefit from more complete data," Mr Graham said.
State "writs of possession" registers record only sales where lenders are forced to apply for repossession orders.
Sydney's outer western suburbs are being hardest hit by the surge in repossessions.
In NSW, 5363 writs of possession were issued last year - up 10 per cent on 2005.
Figures from the Victorian Supreme Court show there were 2791 repossession claims lodged last year, up from 2578 in 2005. The figure has more than doubled since 2003, when there were 1225.
"In southwest, west and northwest Sydney, property prices are weakest and in forced-sale situations property price declines of between 20 and 25 per cent are not unusual," Mr Graham said.
Dara Dhillon, principal of Dhillon Real Estate in Ingleburn in Sydney's outer southwest, said 90 per cent of properties coming to the market were forced sales, and the number of homes hitting the market was rising.
"It's actually getting worse by the month - in one family I was working with, the elderly mother had to return to work to keep a roof over their heads," he said.
But he said that with high employment and healthy wages growth, it was last year's interest rate rises and lax lending policies of non-bank lenders - especially "low-doc" loans where borrowers are not required to prove their income - that were to blame for the current fallout.
"It's a joke - if it was my money I wouldn't lend it but I believe lenders are still doing it," he said. "Low-doc, no-doc, whatever doc - doc doesn't even come into the picture."
Source: The Australian
Monday, May 14, 2007
Home values grow above inflation but Sydney struggles to keep up
House prices grew 1.1% in the March quarter
Over the year, house prices jumped 8.6%
Sydney is lagging national gains
House prices are going back up after a long lull with strong gains recorded in most capital cities as the nation leaves the property downturn well and truly behind. Over the year house price median rose 8.6 percent. Howver Sydney is lagging other property hot-spots.
Average house prices grew by an average 1.1 per cent across Australia in the first three months of the year, according to the Australian Bureau of Statistics's House Price Index, which takes the average of the nation's eight capital cities.
Over the year, house prices jumped 8.6 per cent .
Most capital cities posted strong gains.
The mining boom propped up Perth prices, with house values rising a further 2.1 per cent in the first three months, to be up a whopping 32.1 per cent over the year. While house price growth has slowed, Perth house prices are still growing at the fastest pace in the nation.
Over the quarter, Hobart led the way with a 3.8 per cent quarterly increase in house prices, with values up 10.5 per cent over the year.
Brisbane followed with prices up 2.9 per cent over the quarter and 10.2 per cent over the year.
In Darwin, house prices jumped 2.8 per cent over the quarter and surged 15 per cent from a year ago.
In the south, house prices climbed 1.7 per cent in Adelaide over the quarter and 6.1 per cent over the year.
In Melbourne, prices rose 1.5 per cent and 7.4 per cent over the year.
Sydney lags gains, but also rebounding
But Sydney house prices continue to struggle. Prices in Sydney, Australia's largest housing market, fell by an average 0.4 per cent in the first quarter, and grew at a meagre 1.5 per cent over the past year.
Louis Christopher, head of property research at Adviser Edge, said house prices were rebounding around the nation, including a modest recovery in Sydney, with property investors flocking back to the market given rising rents.
Despite modest growth in the first quarter, Mr Christopher expects Sydney house prices to grow 10.5 per cent in 2007.
"I think what we will see from the June quarter onwards is the median house price numbers will move towards the numbers we're forecasting," he said.
Around Australia
Mr Christopher expects prices to rise between 5 per cent and 8 per cent in Melbourne this year, around 8 per cent in Brisbane and 4 per cent to 6 per cent for Adelaide.
"We expect Perth house prices to record flat to negative house price growth.
"If there were further interest rate rises of 50 basis points or higher, it is likely Perth will record steeper house price falls of between 7 per cent to 15 per cent for the 12-month period after the rate rises.
"Conversely, a sustained downturn in commodity prices would also trigger further house price falls," he said.
In Canberra, house prices are forecast to rise by 10 per cent to 13 per cent in 2007, assuming no more than a 25 basis point rise in interest rates by June.
Mr Christopher said there were increasing signs that after a three-year downturn there was a housing recovery underway on the east coast of Australia.
Auction clearance rates in Sydney, Brisbane, Canberra and Melbourne are higher than this time last year and indeed at their highest levels since the downturn commenced in late 2003.
Improved rental yields and affordability in some cities was helping to push up house values, he said.
Source: AAP
Over the year, house prices jumped 8.6%
Sydney is lagging national gains
House prices are going back up after a long lull with strong gains recorded in most capital cities as the nation leaves the property downturn well and truly behind. Over the year house price median rose 8.6 percent. Howver Sydney is lagging other property hot-spots.
Average house prices grew by an average 1.1 per cent across Australia in the first three months of the year, according to the Australian Bureau of Statistics's House Price Index, which takes the average of the nation's eight capital cities.
Over the year, house prices jumped 8.6 per cent .
Most capital cities posted strong gains.
The mining boom propped up Perth prices, with house values rising a further 2.1 per cent in the first three months, to be up a whopping 32.1 per cent over the year. While house price growth has slowed, Perth house prices are still growing at the fastest pace in the nation.
Over the quarter, Hobart led the way with a 3.8 per cent quarterly increase in house prices, with values up 10.5 per cent over the year.
Brisbane followed with prices up 2.9 per cent over the quarter and 10.2 per cent over the year.
In Darwin, house prices jumped 2.8 per cent over the quarter and surged 15 per cent from a year ago.
In the south, house prices climbed 1.7 per cent in Adelaide over the quarter and 6.1 per cent over the year.
In Melbourne, prices rose 1.5 per cent and 7.4 per cent over the year.
Sydney lags gains, but also rebounding
But Sydney house prices continue to struggle. Prices in Sydney, Australia's largest housing market, fell by an average 0.4 per cent in the first quarter, and grew at a meagre 1.5 per cent over the past year.
Louis Christopher, head of property research at Adviser Edge, said house prices were rebounding around the nation, including a modest recovery in Sydney, with property investors flocking back to the market given rising rents.
Despite modest growth in the first quarter, Mr Christopher expects Sydney house prices to grow 10.5 per cent in 2007.
"I think what we will see from the June quarter onwards is the median house price numbers will move towards the numbers we're forecasting," he said.
Around Australia
Mr Christopher expects prices to rise between 5 per cent and 8 per cent in Melbourne this year, around 8 per cent in Brisbane and 4 per cent to 6 per cent for Adelaide.
"We expect Perth house prices to record flat to negative house price growth.
"If there were further interest rate rises of 50 basis points or higher, it is likely Perth will record steeper house price falls of between 7 per cent to 15 per cent for the 12-month period after the rate rises.
"Conversely, a sustained downturn in commodity prices would also trigger further house price falls," he said.
In Canberra, house prices are forecast to rise by 10 per cent to 13 per cent in 2007, assuming no more than a 25 basis point rise in interest rates by June.
Mr Christopher said there were increasing signs that after a three-year downturn there was a housing recovery underway on the east coast of Australia.
Auction clearance rates in Sydney, Brisbane, Canberra and Melbourne are higher than this time last year and indeed at their highest levels since the downturn commenced in late 2003.
Improved rental yields and affordability in some cities was helping to push up house values, he said.
Source: AAP
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