Investing in residential property without actually buying the property could become a reality within a few months if the ASX has anything o do with it. In a world first, the ASX is considering allowing derivative trading on residential property based on indices compiled by the Rismark/RP data. This will allow investors to gain exposure to the residential property market without holding property.

Banks could hedge against their mortgage books, those that are bearish can short sell and those that think the market is going to move up could go long and even utilise the trade while they are saving for a property to ensure that if the market does move up, they won’t be left behind while they had been sitting out of the market saving for a deposit.

The down side though is that contract owners could end up owing more that what the first invested.

So is this good for property investors… I’m not really sure… for those that have never liked residential property investment; it will be interesting to see if they trade these derivatives… for those that have always liked bricks and mortar property investing, why you would then invest in a derivative contract. It will be interesting to se if this comes to fruition and what happens next.

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The federal budget was announced tonight with an announcement that First Home buyers will have another 6 months of boosted grants. 3 months at the full rate and 3 months at a halved rate. The boosted grant will end 31 December 2009.

I really don’t understand where the Rudd Government is going with this… the extension should have been alot longer and been more focused on new property. Treasurer Wayne Swan said that the initial boost was a success but wasn’t prepared to continue the boost to help support the Australian economy for more than 3 months at the full rate.

I understand the boosted grant can’t continue forever, however the major impact to the overall economy is far greater than the cost to the government in the short term.

So far, according to Wayne Swan, the first home owners boost had already helped 59,000 people achieve the great Australian dream. One would now assume that some panic would be removed from the first home buyers market while first home buyers have a little more time up their sleeve to find the right property for them.

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Some First Home Buyers in Victoria are jumping for joy as new plans are announced for the states First Home Buyers Grant. The grant has been extended by 12 months with some modifications. It is now  focused heavily on new home buyers. The state bonus that was $5,000 has now been increased to $11,000 from the 1st July 2009. Further incentives have also been put in place to encourage home ownership outside of Melbourne in regional Victoria. Where First home buyers were once getting $3,000 for a purchase in regional Victoria, they will now be receiving $4,500 from 1 July 2009. The First Home Buyer state bonus will be avaiable for those purchasing under $600,000.

“Premier John Brumby said today the new package was aimed at helping Victorian families into their own homes sooner by offering $22,500 for first home buyers purchasing a new home in regional Victoria, $18,000 for a new home in metro Melbourne and $9000 for an existing home as of 1 July this year.”

This is a big commitment by the State Government, however the positive effects on this should be well worth it. Further to this, this statement also reduces the pressure of the Federal Government to continue their First Home Buyer Bonus. The focus on the Federal Budget tomorrow night will give us an inidication of where the Rudd Government sees the place of the Australian property and construction industry in the recovery from the current economic turmoil that Australia and the rest of the world are in.

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This was the title of a press release that we sent out in early February. the point of the press release was to advise that the market was going to go into shock when it came to the number of first home buyers hitting the market with the anticipated end date of the boosted First Home owners grant. Needless to say, we were spot on and probably the first to predict it, although a fairly obvious predicition. We had coverage on Channel 9 news and in a number of local papers such as the North Shore Times in Sydney.

We predicited this was going to occur based on the grant expiring, rent becoming more expensive then mortgage repayments in some areas and very low interet rates. Our predicitons were confirmed with agents and developers over the last 2 months stating that anything under $600,000 was flying out the door. The rush was on from First home buyers to secure a property before the grant expired. Further to this the banks have been making it difficult for some as lending criteria has changed and the huge demand for new loan applications has slowed banks cycles rates dramtically.

Now we will wait to see how the Government reacts to what has occured since October 08 and what adjustments if any they will make to the boosted FHBG.

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Government figures have now confirmed what many of us have being saying for months… and that is, it is cheaper to buy than rent in some cases. It is the perfect time for those looking to purchase a home. Prices have stabled, rents are increasing and interest rates have dropped significantly over the last 8 months. This has created, along with the boosted FHOG, plenty of activity in the affordable hosuing market with anything under $600,000 being snapped up by interested parties. There are thousands more home buyers on the prowl at the moment and this is great for the stability of the property market in Australia.

While interest rates are low, and some expect it to go lower during 2009, now is the time to be house hunting with a pre approved mortgage so when you find a home that suites, you can bid confidently at auction or negotiate a private sale.

Good luck with house hunting!

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Australian banks are not expected to pass on the full interest rate cuts that are expected by many economists tomorrow, 7th April 2009. Banks are still claiming that funding costs are still very high.

Economists are mixed with what they are forecasting with some favouring a 50 basis pint cut, while others a 25 basis point, while the majority are expecting rate to be kept on hold at 3.35%, a 45 year low for Australian interest rates.  It is the first time in the many years that AAP has been compiling the monthly rates survey that forecasts for a central bank policy decision have been so close.

If a 25 basis point cut was to occur, this would leave the cash rate at three per cent, it lowest since March 1960 when the average rate was 2.99%.

A 50 basis point cut would put it under the all-time low of 2.89% in January 1960.

The RBA has cut interest rates by 400 basis points over five meetings between September 2008 and February 2009 with the banks  passing on 360 of those basis points to consumers in rate cuts.

Home buyers and propety investors are now saving thousands of dollars a year on their home loans due to the rapid reduction in interest rates over the last 8 months.

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