Robin's Corner - 2009

Robin Matters' weekly quotes covering topics on the mortgage industry to the global economy

July

  • 01/07/2009 - NAB'S chief economist, Alan Oster, forecasts a 10% fall in house prices and further reductions in the Reserve Bank interest rate levels before the end of the year.
  • 10/07/2009 - Alan Kohler recently wrote about the GFC and I quote "The latest victim is Latvia, which has fired a third of its teachers and cut salaries of the police, doctors and nurses by 20%. Unemployment is up 17%, and rising. The overnight cash rate has gone up 200% as it tries to defend the currency peg with the Euro, and the Swedish banks that lent all the money to Latvians are facing huge losses." Thankfully we live in Australia.
  • 14/07/2009 - The level of mortgage stress - the total number of homes spending 30% or more of their weekly income on mortgage repayments - fell from the peak of 900,000 in August 2008 to 546,000 in May, according to Fujitsu Consulting. The Reserve Bank of Australia has cut interest rates by 4.25 percentage points since September last year, reducing the repayments on a $300,000 mortgage by $7,500 a year says ComSec.
  • 22/07/2009 - I met with successful real estate agent, John McGrath, on Friday where we discussed the state of the market in NSW; he advised that one of the biggest growth areas he has seen is mainland Chinese looking to buy for their future and subsequent migration.
  • 28/07/2009 - Apparently the Australian market is responsible for 14 per cent of all of the world’s equity raisings so far this year, which is not bad for a little market that is 2.5 per cent of the world.

August

  • 04/08/2009 - ABS stated that the number of first home buyer commitments as a percentage of total owner occupier housing finance commitments increased to 29.5% in May 2009; the highest ever proportion recorded since they commenced records in 1991. The average commitment was $281,300.

    At Merc we have noted that the first home buyer is still the dominate enquirer, however is now being regularly beaten at auction by the small investor.
  • 11/08/2009 - John Taylor, Professor of Economics, Stanford University recently wrote "The USA federal debt was equivalent to 41% of GDP at the end of 2008; the Congressional Budget Office projects that it will increase to 82% of GDP in 10 years. With no change in policy, it could hit 100% of GDP in just another 10 years...."

    Clearly hard and responsible economic management will be required going forward to manage inflation.
  • 20/08/2009 - An analysis by the University of Western Sydney Urban Research Centre has found that areas along the M4, Windsor and Canterbury Road corridors, as well as the Central Coast are bearing the brunt of the present financial state. The hardest hit is the area around Fairfield and Liverpool, where recent figures show the unemployment rate has jumped to 10.5 per cent - it's highest level since 2001.

    Whilst these two suburbs are quite active for Merc, we had greater work load in 2007 than at present.
  • 28/08/2009 - Recently the Financial Review reported "In 1997 there were 10 regional Banks, today there are 4. In their survey of that year KPMG listed 16 finance companies, today there are 4 (still counting Challenger) At that time there were 22 major building societies, today there are 11 all up. Credit Unions are estimated to have halved during that period."

    As in many other business sectors it appears the cost of doing business in the Finance Arena requires a certain critical mass to survive and that mass has got larger.

September

  • 07/09/2009 - Bridget Carter of The Australian recently reported "Up to a third of the 3000 holiday apartments in Port Douglas are for sale, with one unit recently fetching about $177,000 after selling for $366,000 six years ago, according to local Agents."

    Merc alerted many of their clients as to their concerns with the greater Cairns market about 9 months ago.
  • 14/09/2009 - Research by CB Richard Ellis for the 6 months to June 30th found that about $2.4 billion of commercial property changed hands, well down on 2008. A staggering 47% of all those 2009 purchases were made by private investors while syndicates have suddenly emerged as a major buying source, taking 14% of all sales - being a total of 61% from the private sector. Last year private buyers represented only 38% of al sales. Foreign Investors continue to take about 12% of commercial property purchasers.

    We interpret this as the Private Sector will not pay what the Institutions will pay (which is interesting as they usually have a management fee to come out of the yield) and as such the 'cost' of Institutional funds must be noticeably less.
  • 21/09/2009 - As reported by McCrindle Research, Australia now looks set to hit 22 million people around December 5th 2009; an extra 1 million people in under two and a half years!

    According to the research:
    1 in 3 people reside in NSW (7,041,393)
    1 in 4 resides in Victoria (5,364,796)
    1 in 5 people reside in Qld (4,349,529)

    These augers well for the new home builders and associated industries.
  • 30/09/2009 - Commonwealth Bank of Australia and Westpac Banking Corporation together wrote 85% of all new mortgage business in the quarter ended June 30th, according to research by Coredata. Residential lending by Australian Banks increased by $35.6 billion to $932 billion of which CBA and Westpac delivered $30.3 billion during the 3 month period.

October

  • 05/10/2009 - Choice magazines October edition releases the findings of their personal banking survey with Bendigo Bank achieving the highest overall satisfaction score for a bank.
  • 13/10/2009 - China is now the biggest importer of Australian exports, having taken over from Japan this year, who in turn snatched the mantle from the UK in 1966
  • 19/10/2009 - China as a whole has already surpassed the United States to become the world's biggest emitter of greenhouse gases. The two countries account for 40% of the world's total emissions (Associated Press July 29)
  • 26/10/2009 - The Irish Government plans to create a "Bad Bank" who would pay five Irish Banks $79 billion in Government backed bonds and the "Bad Bank" will take ownership of $113 billion in loans to more than 1500 property developers, only 40% of whom are making repayments

November

  • 02/11/2009 - Mortgage Lenders on United States office properties in default recovered only 53% of the capital owed to them this year. According to a report by Real Capital Analytics investors got back about $US737.3 million from about $US1.4 billion.
  • 09/11/2009 - According to the USA's Department of Labour’s household survey, another 558,000 people lost their jobs in October. There are now 15.7 million people out of work in the States.

    I will be able to report more shortly as I am attending the National Association of Realtors Conference 12th - 20th of November.
  • 23/11/2009 - As recent report in The Australian Financial Review read as follows; "the RBA made a record $8.8 billion in profits in 2008-09 through the worst year in living memory for the markets.

    That's proved handy for the high-spending federal government with a record $6 billion dividend paid, although like so many companies the RBA is warning of lower dividends this year."

December

  • 01/12/2009 - I read a great quote recently in an article by a Canadian Investor / advisor "The global economy is operating in an untested and entirely artificial environment. Governments have intervened in every market from bonds to mortgages; they have even managed to keep Chrysler in business. Subtracting the effects of the stimulus, the real underlying strength of the economy is a mystery." Ain't that the truth!
  • 08/12/2009 - Another interesting statistic - The average net Government debt amongst G7 nations is 78% of GDP whilst Australia sits at about 3.7%. Not bad!
  • 16/12/2009 - Another interesting statistic - AMP senior economist, Matthew Bell says some of Sydney's harbour side areas showed median price falls of 40% to June 2009. That would hurt.
  • 23/12/2009 - Another recent and socially sobering statistic from the USA - unemployment for African American men is 16.5%, for black men and women in the 16-19 year old demographic it's 40% compared to the over-all unemployment rate is 11%

We constantly seek to understand the market places we are working in so we are best positioned to assist our Client's decision making process