The Reserve Bank of Australia has announced that the official rate is to be kept on hold at 4.75 percent, which means that it will now remain steady for the next two months. This comes after the surprise decision that was made last month, which saw the central bank announce an increase in the official rate, and resulted in some of the major banks hiking up mortgage rates by much more than the 25 percent basis point increase.

The decision to keep rates on hold this time will not have come as a surprise to most industry officials, as it was a move that was widely expected. An economist from HSBC described the latest official rate decision as “almost a fait accompli” adding that mortgage rates increased by around 40 basis points last month “which is plenty of tightening for now”.

The board meeting held this week was the last one until February 2011, which means that consumers have the peace of mind that the official rate will now remain static for another two months. Glenn Stevens, the Governor of the central bank, said that consumers were continuing to show caution when it came to spending and borrowing, and that this had led to a noticeable increase when it came to the household saving rate.

Craig James, a CommSec economist, said that whilst this month's move came as no surprise to the industry many thought that the RBA had moved too early on last month's rate increase. He also predicted that the official rate could now be held on hold until April of next year, stating: "I think the language is showing the RBA relaxed about the situation."

Another economist, Richard Robinson from BIS Shrapnel, also expressed surprise over the rate rise from last month, but said that he was no surprised over this latest decision to keep rates on hold. He added that the housing market had already been experiencing problems but that rate rises by the four big banks following the November rate rise had slowed the market down even further.

After the meeting this week Mr Stevens, the governor of the RBA, said: "Following the board's decision last month to lift the cash rate, and the subsequent increases by financial institutions, lending rates in the economy are now a little above average. The board views this setting of monetary policy as appropriate for the economic outlook."

Economists have also said that the RBA is going to need the leverage to increase rates later on when problems such as skilled labour shortages start to kick in, with many agreeing that the November rate rise came far too soon. One added that inflation was not a big problem at the moment, and although it could become a problem later on increasing the official rate now would do nothing to help that. He said: "We haven't got the housing market driving growth, we haven't got households driving consumption expenditure. Everyone's pretty tentative. Inflation's not really a problem - not yet anyway. It will be later and an interest rate rise doesn't help that."

Australia, like many other countries around the world, has seen a boom in property prices over recent years, and the price of property has rocketed in the space of just a few years. A recent report has shown how property prices in the Melbourne area have soared in the space of just four years.

According to figures the value of houses in Melbourne has soared by 145 percent in the last four years. The data was released by the Australian Bureau of Statistics, which showed that in the Melbourne area the average value of a home increased from $284,600 in 2005 to $697,500 in 2009. During the four years period the second and third biggest house price increases were seen in the municipalities of Queenscliffe and Port Phillip.

A spokesperson for REIV, Robert Larocca, said that whilst property valuations provided an effective indicator of the real estate market the figures were not set in stone. He stated that homeowners had to consider the fact that whilst the increases in property values meant that they would get far more for their property than they would have several years ago it also meant that they would be paying far more for the property that they were buying in its place.

He stated: "Home values may have gone up, but so has the one that you would move into and then you are looking at stamp duty. The council valuations are struck to apportion how rates are paid ... the actual sale is influenced by how many other properties are on the market, when you are seeking to sell your home, and the overall market."

He also said that the huge increase in property prices in the area was a reflection of the number of upmarket houses that had been built over recent years. In Queenscliffe property prices saw the highest average value outside of the city in 2008/2009, with property prices increasing by 83 percent to an average of $515,500. Larocca said: "It's a very cute seaside town. Like most parts of Melbourne that have bay frontages the prices have increased, but it is a smaller area and it's a bit more exclusive."

The increase in house prices will not necessarily benefit all homeowners, as many will get more for their property if they sell but will also pay more for another home if they are moving on. However, there are some people that will benefit financially on a huge level, such as those that have more than one property and are simply selling one of their properties, or those that are moving in with family or a partner, hence their reason for selling the home.

However, whilst property prices have soared over recent years some industry experts have predicted that they may fall again in the future as a result of unsold stock levels increasing, which stems partly from potential buyers struggling to get the finance that they need in the current climate.

Many people that own their own homes toy with the idea of going that step further and becoming a property investor, and this can be a very lucrative and successful move for those that go about it the right way. However, there are many aspiring property investors that make mistakes that can prove to be costly, and this is why it is important to know how to avoid mistakes before you take the plunge.

Below are few very important points when it comes to investing.

Investing in property is not the same as having bought your own home:

A common mistake amongst first time investors is thinking that because they dealt with the purchase or sale of their own home they know all that the need to know to be a successful property investor.

This is not the case, and could result in you missing out on valuable investment opportunities such as the ability to invest in property in an area that you may not be familiar with but which has far greater growth potential than the areas that you may be considering.

People tend to look in areas they know and are comfortable with aka their ‘comfort zone’. Most commonly within a 10-kilometre radius of where you live. The problem with this approach is that there may be suburbs with far greater growth potential outside your comfort zone. And the point of property investing is to grow your capital, so having access to independent and up-to-date property research is really important.

Your friends and family don't always know best:

Close friends and family can be invaluable in certain situations, but unless they are actually experts in property investment it is best not to seek their advice about property investment opportunities. The advice that you will receive will most likely by based on their own personal opinions and experiences, and this advice could steer you wrong or result in you missing out on great opportunities.

Don't leave it too late:

It is a natural reaction for most first time investors to be cautious about ploughing their money into the property market, and some may spend long periods of time changing their minds and going back and forth with regards to their investment intentions. However, this procrastination could result in you never taking the plunge and missing out on what could be a huge money making opportunity.

There are two strategies that you can consider as a first time investor. The first is to buy a property very cheaply, and these are often ones that need work doing on them. You would then make the necessary improvements required to the property and simply sell in on at a profit once completed.

The second option is to hold on to the property, which will allow your investment to grow over time if you have purchased at the right price and in the right area, and could provide a good income for your retirement as well as providing you with a valuable asset.

Stick to thinking about the finances:

Some people do get attached emotionally when it comes to properties, but it is important not to base your choice of property purchase on your emotions. Investors should always put finances first, and the money side of the investment should be the most important factor without letting personal taste and emotion get in the way.

One thing is certain, this is a business proposition.  You are not going to live in it.  Too many people get carried away with the emotional side of the property.

It doesn’t matter if you have a spa in the bedroom at home and the investment property doesn’t, or the window coverings are not what you have at home. It is a commercial decision – which property will give you the strongest capital growth, save you the most tax, with your contribution being the lowest?

Avoid older properties:

Whilst some people may be tempted to opt for an older property as their investment property, this can prove to be a costly and time consuming mistake. Many older properties require a lot of maintenance, which will be the responsibility of the landlord even when tenants move in, and the time and money involved in maintaining the property can be shocking.

It is a good idea for property investors to look into buying off plan, as a new property will be able to generate profits far more easily. The ability to depreciate a new home more quickly means that as an investor you could qualify for thousands in tax benefits, as well as enjoying better rental income and avoiding the maintenance costs of an older property.

Avoid over-spending on an investment property: It can be tempting to see a property in a lovely area, with brilliant views and lots of facilities, and you may think that this is the ideal investment property because it will be popular amongst those looking to rent. However, paying a high price for investment property based on these factors can be risky, as any problems with the economy and the financial markets could mean that tenants cannot afford the rental required to justify the cost of the property, which in turn could mean that it remains vacant for long periods of time. Investors reduce their risks by opting for an average priced property that people are going to want to rent and be able to afford to rent.

Don't try and be a financial expert:

Investing money in property can be very lucrative but can be risky for those that try and cut corners by failing to seek out expert assistance in particularly high risk areas such as financing the investment.

It is important not to assume that getting the money for your investment is all about looking for the cheapest loan, and then it's full steam ahead. This can actually be very risky, and with other financial factors to consider, such as taxes, rental returns, maintenance costs, stamp duty, and more it is vital that as a first time property investor you get the right financial advice from experts.

Don't let the taxman take your interest and hinder your cash flow:

One mistake that many people make is to wait until the end of the year before claiming tax deductions for depreciation of the property. However, this can actually be paid on a fortnightly basis, and this means that the interest earned on the money comes to you rather than to the tax office. It also means that you are less likely to have a cash flow problem in the event that you have to make up any gaps where the property is not tenanted.

Always use a property manager:

The theory behind renting out your investment property may seem simply but in actual fact it can be hard work and very time consuming. A bad tenant, in particular, can have a serious effect on your investment and your peace of mind, which is why it is seriously worth considering having an property manager to deal with tenant issues, conduct credit checks, ensure that rent is kept up to date, prepare paperwork and tenancy agreements, and deal with many other areas of your investment property.

Take out adequate landlord protection insurance cover:

Your property is a big investment and you need to ensure that it is properly protected. Failing to take out adequate landlord protection insurance can be a big mistake, especially considering that this cover is both affordable and offers valuable peace of mind.

Landlord protection insurance is very affordable.  For what it covers, it is essential that each property you own, is covered.

Written by Michael Sanz

Treasurer Wayne Swan has lashed out at the Commonwealth Bank of Australia following its announcement that its key lending rates were to increase by almost double the level of the cash rate increase. On Tuesday the Reserve Bank of Australia announced that the case rate would be increased by 25 basis points to 4.75 percent, and since then the CBA has announced that its key lending rates would increase by almost double that level.

The CBA lending rates for variable rate mortgages are being increased by 45 basis points, and this has sparked an angry reaction from Treasurer Wayne Swan. He accused the CBA of being involved in a 'cynical cash grab' and has now said that he is putting together a package of reforms that will see competition within the banking sector improve. The details of the reform package, he said, would be provided next month.

The banking industry body, the Australian Bankers' Association, has defended the decision of the CBA to increase its variable rate mortgage rates by 45 basis points, stating that funding costs had increased on both wholesale and deposit fronts for banks. Steven Munchenberg from the ABA said that it could not be assumed that banks were being unreasonable by increasing rates in this way just because had not bowed to 'bullying by government'.

However, he also said that the banking industry was prepared to consider reforms that were aimed at increasing competition within the sector as long as the reforms were deemed appropriate. In a recent interview he stated: “We would welcome appropriate moves to increase competition.”

Swan has not yet provided details of any of the proposed reforms that will be included in his package. However, Joe Hockey, the opposition Treasury spokesman, has said that Swan should release details of the reforms right away rather than waiting until next month, as the details needed to be released before other major banks started to increase their mortgages rates as well.

In the meantime the Finance Minister Penny Wong has warned that lenders need to be careful about how their customers will view the fact that they have increased or are considering increased their rates by a level that is higher than the increase in the official cash rate. She said that consumers had every right to be upset over the CBA rate increase, adding: “I would encourage other banks to consider how their customers perceive them moving from the official independent Reserve Bank increase.”

Swan said that some customers may be better off actually moving their mortgages if their providers increased rates by too much. He added that often losing customers on mass was the only language that the banking giants understood in circumstances such as these.

Referring to his package of reforms Swan also said that they would be “enduring and lasting and will deliver benefits to the Australian people”. He added: “We are going to empower our regulators with all of the powers that they need to make the system more competitive. And that's what we're doing.”

Figures have recently been released by the Australian Bureau of Statistics showing that in September home loans in Australia increased for the third month in a row. The level of the increase was higher than the level that had been predicted by many industry experts, and indicated that confidence levels amongst consumers has been increasing.

Although there was uncertainty in September with regards to whether interest rates would increase this does not seem to have put off consumers, who are said to have taken the threat of possible increases in their stride. Whilst the cash rate went up earlier this month from 4.5 percent to 4.75 percent, in September, which is the month on which the ABS figures were based, any talk of a cash rate increase was mere speculation.

September saw home loans increase by 1.3 percent according to the figures from the ABS, and this was higher than the 1 percent increase that some industry officials had predicted. The September increase followed a 1.1 percent increase in August. ICAP analyst, Adam Carr, said that it was clear that lending levels were increasing, and that the figures came as good news.

Rising interest rates and a shortage of affordable housing is set to put increased pressure on the property market, and this will invariably have a knock on effect on the home loans sector. However, over the past couple of months the increased stability of the economy in Australia coupled with increased consumer confidence has helped to boost home loan figures.

Carr said that there was fundamentally nothing wrong with the Australian lending markets, adding that the established lending market was doing very well. However, he added that people could start to lose confidence as a result of concerns about the way in which the cash rate would continue to go.

Following the cash rate rise from the Reserve Bank of Australia the Commonwealth Bank quickly took steps to increase the rates on its variable rate mortgages. It has been reported that other major Australian banks are getting geared up to follow suit, and this could also impact upon consumer confidence over the remainder of this year.

Referring to the home loan figures for September the ABS reported that the value of loans for homes that were owner occupied increased by 0.6 percent to a value of $13.75 billion. There was also an increase in the value of loans for investment properties, which increased to $6.63 billion, reflecting an increase of 1.7 percent. The ABS also outlined figures relating to commitments to buy homes, with figures showing that there was a fall in the number of commitments to buy new homes, which fell by 3.2 percent following seasonal adjustments. However, there was an increase in the number of commitments to buy established homes, which increased by 1.6 percent.

Mr Carr said: "The established lending market is doing very well. The numbers show there is nothing structurally wrong with the lending markets but people have been spooked by the pace at which rates are going.” He added: “The lending numbers and approvals numbers both point to on-going price gains."

Written by Michael Sanz

The Reserve Bank of Australia has announced that the cash rate has been increased by 25 basis points, taking the official cash rate up to 4.75 percent. The move marks the fourth time in five years that the central bank has increase the cash rate on the first Tuesday in November. However, despite this many economists and analysts have expressed surprise over the decision to increase the rate this year.

Out of twenty four economists that were polled prior to the decision being announced seventeen had expected the cash rate to remain on hold this month. For many the decision to increase the cash rate came as a surprise because of the consumer price figures released by the Bureau of Statistics last week, which showed that in the three months to the end of September inflation had remained in line with the central bank's 2-3 percent target.

The increase in the cash rate is now likely to spark concerns over the knock on effect that this will have for borrowers, and how much home loan interest rates will be increased by banks. At present the interest rates on variable rate mortgages are between 7.24 and 7.51 percent. Officials have said that even if the banks only pass on the official 25 basis point increase it could add nearly $50 to the monthly repayments on a $300,000 mortgage that is being repaid over a twenty five year term.

Whilst many may be hoping that the RBA decision will not have too severe an impact on home loan interest rates from banks senior bank officials have been repeating warnings that in the event of the official cash rate rising the interest rates charges by banks on home loans would also have to increase due to higher funding costs.

The news of the cash rate rise comes at a time when many homeowners may be sorting out their finances for the up and coming Christmas period, and for those that are on variable rate mortgages this is likely to cause particular concern because of the timing. Many may already be struggling when it comes to funding their Christmas purchases after a difficult and turbulent financial year, and any rate rises applied by banks on home loans at this particular time could bring added pressure.

Glenn Stevens, the Governor of the Reserve Bank of Australia, made the announcement about the cash rate increase after the meeting held today, and advised that the new 4.75 percent rate would come into effect as of 3^rd November 2010. He also issued a statement following the meeting.

The statement from Stevens read: 'For some time, the Board has held the stance of monetary policy steady, which has resulted in interest rates to borrowers being close to their average of the past decade. This allowed some time to observe the early effects of previous policy changes and to monitor the uncertain global outlook. The Board is also cognisant of differences in the degree of economic strength by industry and by region. However, the economy is now subject to a large expansionary shock from the high terms of trade and has relatively modest amounts of spare capacity. Looking ahead, notwithstanding recent good results on inflation, the risk of inflation rising again over the medium term remains. At today's meeting, the Board concluded that the balance of risks had shifted to the point where an early, modest tightening of monetary policy was prudent.'

http://www.abc.net.au/news/stories/2010/11/02/3055068.htm?section=justin

http://www.rba.gov.au/media-releases/2010/mr-10-26.html

Written by Michael Sanz

The Advantages Of Buying An Off-The-Plan Apartment

There are a lot of benefits in purchasing an off-the-plan property. If you are an investor and are looking for investment, then take a look at the advantages:

Price

To encourage a faster sales rate, the developers start offering their newest venture at a much lower price. Once the developer has met with their construction finance, they usually raise the price. Therefore, if you wish to invest in an off-the-plan property, commit yourself early to potentially gain more.

Property at Today’s Price

You need to pay a 10% deposit upon signing the contract with the balance not required until the property is completed. Therefore, you are actually able to get the property at today’s price even if the market rises, you can surely enjoy any capital growth. Of course it can happen the other way round. The market price might fall, but that’s a rarity.

Tax Benefits

There are a few tax benefits here just like it is with all investment property purchases. When the property is new, there is greater tax depreciation available.

Save on Stamp Duty

The rate of stamp duty increases with the completion of the building. The concession is greatest if you bring the property before the development begins.

Other Savings

As already mentioned earlier, you just need to pay a deposit of 10% until the property is completed. A property might take 18months or more to complete. Therefore you get ample time to save a certain amount to fund your off-the-plan property. Later as it is completed, you can approach the bank for further finance.

Wider Choice

The greatest benefit of an off-the-plan property is that you get to choose the designs and locations where you want them (of course price dependant). This offers a better potential for rental yields as well as strong capital growth.

Ralph Norris, the CEO of the Commonwealth Bank of Australia, has recently stated that competition is set to return to the Australian mortgage markets, with a number of non-bank lenders showing signs that they are ready to re-enter the mortgage sector again. This follows a mass exit of smaller, non-bank providers from the market during the global financial crisis.

Many non-bank lenders withdrew from the market during the downturn, but Norris believes that they will soon start to return to the market with some already said to be writing mortgages again. The move will increase rivalry in the market, with smaller lenders returning to take on their larger rivals again, and this could come as good news for borrowers, as it will mean greater choice and could result in better deals as the rival lenders compete with one another. Britain's Virgin Money is already said to have restarted Australian operations, and many others are expected to follow suit.

Norris also warned that competition could be further increased by new entrants to the Australian mortgage market that come from abroad. He said that the Australian market presented very good opportunities for offshore banks in places such as Asia, particularly in cases where the banks were currently operating in weak economies.

Mr Norris stated: "Competition is also likely to come from new entrants into the Australian banking sector from offshore. The strength of the Australian economy and our proximity and links with Asia present a very appealing option for offshore banks, particularly for those banks faced with a subdued home economy."
The Commonwealth Bank chief said that a number of factors would be likely to contribute towards greater competition and rivalry in the mortgage sector. He said that increased activity in the securitisation market and rising interest rates would be amongst these factors.

The re-entry of smaller lenders and the entry of new lenders to the Australian mortgage market is likely to cause concern for the larger banks, which gained a monopoly in the market after the smaller lenders withdrew during the financial crisis. The greater competition will mean that larger banks have to work harder to maintain their share of the mortgage market. Mr Norris added that another concern was that some non-bank lenders may not be as strictly regulated as the banking industry.

Speaking at a recent FINSIA conference in Sydney he stated: "As the cost of credit to consumers continues to rise, it does send an invitation to non-banking institutions to explore ways to offer low cost loans. On the upside, this has the potential to promote innovation within the financial sector. On the downside, the risk of non-regulated players entering the market and taking increased risks with the lending and borrowing practices is something for the banks to watch carefully."

He also said that the rivalry and competition that had driven banks to increase riskier lending in the past was still evident, but that the lessons learned during the financial crisis would influence the nature of the competition.

Article Written by Michael Sanz

Over the last three decades Australian house prices have recorded periods of extreme growth contrasted with periods of weakness. With the benefit of time, the peaks and troughs of house price growth tend to even out, with Australian house prices recording an average annual rate of growth of 8.4%.

The Australian property market moves in cycles which are influenced by a wide range of factors including unemployment, interest rates, consumer confidence and of course previous rates of growth that impact on rental yields and levels of affordability.

Over the last three decades Australian house prices have increased at the average annual rate of 8.4%. That’s a pretty decent rate of growth when you consider that prices double every ten years based on an annual compounding rate of 7.2%. In comparison, the rate of inflation has averaged about 4.6% over the last 30 years and 3.2% over the last decade.

Of course, there have been some periods where growth rates have well and truly eclipsed this average rate of growth and periods where prices have well and truly underperformed.

As an example of one of the weakest periods for Australian house prices, over the five years from 1990 to 1995 the median house price across Australia increased by just 2.8% per annum. The soft market conditions came at a time when Australia was entering the “the recession we had to have” and unemployment raced upwards from 5.8% in January 1990 to peak at 10.9% in December 1992. Mortgage rates during this five year period averaged 11.75% and peaked at 17%.

At the other end of the spectrum, the most spectacular five year run was recorded during the ‘boom’ which ran from 2001-03 around most areas of Australia. Despite a slowing in growth rates between 2004/05, the five year period ending July 2005 saw average house price growth of 13.9% per annum.

Currently the residential housing market is transitioning out of a strong growth phase, however economically the country is just starting to ramp up. Gross domestic product figures show the economy is once again growing at about 3.2%, unemployment is trending downwards, consumer confidence remains high and rental yields are showing the first signs of improvement after being eroded by value growth and lower rental rates during 2009.

In contrast to the broad market drivers outlined above, we can expect there also to be factors that will dampen market demand. Interest rates are likely to increase at least once over the coming 6 months after increasing by 150 basis points since October last year. Population growth appears to have peaked and will most likely fall further as the proposed cuts to migration are implemented and housing affordability is likely to become more of an issue in the larger metropolitan markets around Australia.

For prospective buyers it is worthwhile considering the long term trends in the market. The average length of tenure for Australian home owners is about 7.3 years; a time frame that is likely to smooth out the peaks and troughs of price growth encountered through the cycles. The economic and demographic foundations of the market remain solid which suggests that we are likely to see ongoing improvements in Australian house prices, albeit at a much more modest rate that what was seen between 2009 and the first quarter of 2010.

Article courtesy of RP Data www.rpdata.com.au

The results of the RP Data-Rismark Home Value Index for June showed that the unit market has outperformed houses over the last 12 months and during the last five years.

Historically, houses have enjoyed a much more rapid appreciation in value than the growth recorded by units. There are a number of reasons for this more rapid level of growth: greater demand for houses, diminishing availability of development land, higher quality of stock and design available for houses rather than units and the greater Australian dream to own a house rather than a unit, amongst a number of other reasons.

Despite these factors, over the last five years units have recorded average annual value growth of 7.4% compared to 7.1% for houses. However, the results suggest that the superior performance of units compared to houses is quite a new phenomenon as over the last 10 years the average annual value growth of houses (9.9%) has well and truly outperformed units (8.0%).

The improvement in the capital growth performance of units in recent times is most likely due to affordability issues. Based on current capital city median prices, unit prices are recorded at $420,000 compared to houses at $495,000. Accordingly, units offer a much more affordable alternative housing option than houses.

Many unit developments, particularly newer units, are also in strategic locations and are where a large proportion of the market aspires to live but cannot afford to buy a detached home. In many cases, apartments provide a viable and relatively affordable option to buy into these markets. A good example of this is Bellevue Hill in Sydney. Bellevue Hill is one of the country’s most expensive housing markets with a median house price of $3.85 million, unit prices in the suburb are recorded at $620,000, -84% more affordable than a house.

The inner city and well established residential areas enjoy high demand for units because in most instances they are: well catered to by local amenity including shops and restaurants, well located close to working nodes and are serviced by existing public transport amenity which is often not available in outer suburbs of the capital cities.

Over the 12 months to June 2010, unit values have increased by 11.4% compared to growth of 10.2% for houses. On a month-to-month basis, annual value growth for units has been outstripping that of houses fairly consistently since April 2008.

Throughout the individual capital city markets, the growth in the value of units has outperformed houses within Sydney, Brisbane, Perth and Darwin over the last 12 months.

Throughout the capital city markets Hobart has the most affordable units with a median price of $254,250 and Sydney the most expensive with a median of $450,000.

When the differential between median house prices and unit prices is analysed you gain a greater insight into the performance of the market.

Darwin has the greatest differential between house and unit prices at $142,176 and the smallest differential is recorded in Adelaide ($67,252). Sydney, Brisbane and Darwin each recorded a differential in median price of at least $90,000 and these three cities each recorded a greater level of annual value growth for units rather than houses over the last 12 months. Perth also recorded a superior performance for units over the last year however, the price differential in that city is $75,000.

Although the popularity of units is increasing, since the onset of the Global Financial Crisis (GFC) many developers have found it much more difficult to obtain finance for higher density developments. This is due to the fact that the banks are becoming more risk adverse and the fact that a number of high profile higher density projects have either been cancelled or delayed. The latest building approvals data showed that over the year to June 2010 the number of approvals for private sector units has rebounded very strongly (57.7%) however, the monthly volume of approvals is still well below levels consistently recorded prior to the onset of the GFC, highlighting that finance for higher density product is difficult to obtain.

It’s undoubted that units have significant appeal for price sensitive purchasers due to the fact they can own in a popular location at a far lesser price compared with a detached home. For investors, units are appealing because in most instances the rental yields are much higher than they are for houses. Across the capital cities, the average gross rental yield for a unit is currently recorded at 4.8% and for houses yields are recorded at 4.0%. The superior rental return achieved by units can be attributed to the fact that units are typically located in areas that have high demand: close to major transport networks, employment nodes or retail centres.

Housing finance data released this week by the Australian Bureau of Statistics (ABS) shows that demand for housing finance continues to decline.

In seasonally adjusted terms, the total number of housing finance commitments for owner occupiers fell by -3.9% during June following a 3.0% increase in May. Total owner occupier finance commitments have been trending lower since July 2009 and during June 2010 there were large falls recorded amongst finance commitments for the construction of new homes (-5.0%) and for the purchase of new homes (-4.5%). Housing finance data also showed that the total value of finance commitments for investors eased during June as investors committed to $7.3 billion worth of finance compared to $7.6 billion in May. Increasing investor activity had been the main positive to come out of the housing finance data over recent months, with owner occupier activity retreating, it will be important to see if the lower levels of property value growth results in fewer investors.

The August results of Westpac’s and the Melbourne Institute's consumer sentiment survey were also released this week and the index increased by 5.4% following an 11.1% increase the previous month. The index now sits at 119.2 points, it’s highest level since January this year. The Index has shown volatility over recent months however, it now appears that consumers are overwhelmingly more optimistic than pessimistic.

The number of newly advertised property listings increased by 3.0% over the week however, they remain -1.0% below the 12 month average level. Total advertised property listings remain at quite high levels and increased by 0.8% over the last week. Total property advertisements are currently 5.1% above the 12 month average and with property value growth slowing, properties for sale are likely to take longer to sell. As a result it will be very important to watch total listings over the coming weeks to see if they remain at above average levels. Should total listings continue to mount it would suggest that selling conditions are becoming much tougher and negotiating power would swing further in favour of the buyer.

The weighted average capital city auction clearance rate remained unchanged from the previous week and recorded at 56.4%. Within the two largest auction markets, Melbourne and Sydney, clearance rates fell from 67.5% last week to 64.2% this week in Melbourne and increased from 57.5% last week in Sydney to 59.2% last week. Across all capital cities there was more than 1,200 auctions last week.

The number of newly advertised rental properties fell by -0.5% last week and was recorded at its lowest level in five weeks. Despite the fall in new rental advertisements, total rental listings recorded a 0.7% increase over the week.

Source: RP Data

Looking for a great place to have a business lunch? Take a look at www.facebook.com/topmelbourne for some great ideas. We found a great bar in St Kilda for a small presentation.

The Rental market is going absolutely crazy! We have ZERO % Vacancy!!!! Let me know if you are having trouble leasing out your property. We have a list of people in all areas waiting to move in!