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The battle to take control of Wizard Home Loans, as reported a few weeks ago by Marquette Turner, is over. Despite expectations that National Australia Bank would take control of the brand and franchise network, the race has been won by Aussie Home Loans.
GE Money has offloaded its Australia and New Zealand mortgage offshoot for an undisclosed amount, but it is likely to be considerably less than the $400 million AUD it paid for it, given the drastic changes in the economic climate.
As part of the deal, the Commonwealth Bank of Australia (CBA) will sell its 33% ownership of Wizard to Aussie Home Loans, whilst at the same time acquiring up to $4 billion AUD of mortgages originated by Wizard, dealing another blow to NAB’s expansion efforts.
The deal suggests that the non-bank sector still has some life in it yet.
The sale of Wizard to Aussie Home Loans is expected to be completed by the end of February 2009, around the same time that CBA will take hold of the first $2 billion AUD of loans by the end of February 2009. CBA remains in discussions with GE Money over acquiring the additional $2 billion of loans.
A $80 million AUD luxury development in Point Piper, Sydney, has been handed over to the banks after two of the companies for which property tycoon Michael Bezzina was associated, Caprice Pty Ltd and Pyoanee Pty Ltd, were place in receivership.
Located in Point Piper, Mr Bezzine was expecting to achieve $14 million AUD for the penthouse-style apartments, however, three of the apartments have allegedly exchanged for $10 million AUD each.
The development comprises waterfront apartments, each occupying an entire floor with balconies looking out to the Harbour Bridge and Opera House. They have four bedrooms, four bathrooms and a guestroom, as well as a jetty.
In September, one of Michael Bezzina’s company’s that developed the $100 million AUD Jade complex in Surfers Paradise, was put into liquidation. The company reportedly paid $17 million for the site six years ago, of which six out of the nine apartments have sold, one of which sold for almost $20 million, while the penthouse at the complex remains on the market for $22 million.
It is worth noting that the quality of Bezzina’s developments is outstanding, and his financial troubles should not be allowed to cloud the stunning properties that he has been involved in creating.
FYI: Read related articles on Sydney Property; or Luxury Homes; or Sydney Harbour
The US Federal Reserve has set key interest rates to a record low zero to 0.25% in a desperate bid to stimulate the US economy which is looking increaingly sick
Rates are likely to remain this low for quite some time, the Fed stated.
The cut brings the federal funds rate to the lowest level since July 1954.
Wall Street rallied after the announcement, whilst oil dropped 2% to $US44 a barrel
The Fed has also stated that it will expand purchases of debt issued by mortgage agencies to support the housing market in it’s efforts to promote the resumption of sustainable economic growth and to preserve price stability
More information: The Federal Reserves statement.
After losing their market share to mortgage brokers during the real estate boom years in the earlier years of this decade, Australia’s banks are on the offensive.
First off the market his year was Westpac which acquired the RAMS Home Loans brand, followed by the Commonwealth Bank which acquired a stake in Aussie Home Loans in August 2008.
Now National Australia Bank has revealed that is planning to purchase the Wizard Home Loan’s brand and Australian distribution network, no doubt for considerably less than the $500 million AUD now embattled GE Money purchased the company for in 2004.
NAB has also stated that it is also negotiating to acquire up to $4 billion of prime mortgages from Wizard. The bank says the portfolio is made up of mortgages with a maximum loan to valuation ratio of 90% and is 100% mortgage insured.
Does this mean that ANZ will be the next to make a purchase?
Further to our recent report of the NSW tax hikes to hit the property industry, now it’s been revealed that Queensland Premier Anna Bligh plans to impose a special tax on landholdings worth more than $5 million.
Under the property tax surcharge, part of a series of measures introduced as the QLD Government attempts to plug a $4.3 billon hole in the state’s budget over the next four years, landholders who own parcels of land will pay a 0.5% surcharge from 2009-10.
Sure to hit property developers hard at a time when the industry can least afford it, the decision will also likely cost 3500 jobs. It is important to recognize that the property sector employs one in seven workers in Queensland.
On top of the property tax surcharge, the Bligh Government has also raised vehicle registration costs by an average of 6.5% and delayed the abolition of transfer duty on core business assets by 18 months.
Whilst we are in no way suggesting that the Queensland Government shares similar brain cell(s) or genes than the hapless NSW government, what is concerning is the tendency of Australia’s fiscal “experts”, it would appear, to resort to anything but measures that stimulate and encourage innovation businesses and in turn the economy. Surely reducing land tax – a policy long championed by Australia’s real estate industry – would be a better option to stimulate the sector and economy.
Michael Marquette, Co-President of Marquette Turner Luxury Homes, states “Are the states tightening their belts, penalizing businesses and therefore consumers with the hope that the Federal Government will deal with the aftermath? Whatever it is, the economic credentials of those that run our States and Territories should be seriously scrutinized.”
Isn’t the relative basket case that is NSW – Australia’s most populous State – a good enough example of what not to do?
How’s this for short-sightedness: The New South Wales Government’s infinite wisdom to increase taxes by $3.6 billion AUD to compensate for their years of inept mismanagement of states coffers will have a huge impact on the property sector at a time when it can least afford it.
NSW Labor Premier Nathan Rees and Treasurer Eric Roozendaal plans to raise $680 million by increasing the land tax rate from 1.6% to 2% for properties over $2.25 million in land value, essentially a 25% increase, which will increase holding costs for land owners, discourage developments and lead to an increase in rental charges.
The flow on from this will lead to further job losses in the property industry, which is already shedding staff at more than one hundred per week.
We argue that this is not the time for tax hikes, but for the government to show some innovative thought, boost confidence and stimulate the economy. Or at least start spending NSW tax payers money wisely. But then again, given the churn of Premiers in the state and thus their lack of accountability, what do they care?
The world’s most expensive location for prime real estate behind Monaco, Central London has seen luxury home values fall for an eighth month. Such locales include Mayfair, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.
As recently reported by Bloomberg, in November the approximate average value of a house or apartment in the city’s nine most expensive neighborhoods fell 3.6 percent from October, according to an index compiled by Knight Frank. This represents the second largest drop since the index started in 1976. Furthermore, the figures show that property values declined 14 percent since the previous year.
Why is this? Quite simply, vendors are not holding out for emotional prices and are accepting that price reductions have to occur for a sale to be achieved.
Prime Central London real estate has taken longer to register declines seen elsewhere in London because of a standoff between sellers and buyers over price. That ended in September, when the bankruptcy of Lehman Brothers Holdings Inc. caused demand to collapse from those employed in financial services, traditionally the mainstay of demand for expensive homes.
Unsurprisingly, the worst banking crisis seen since the First World War has translated into job cuts and reduced bonuses, and in London it’s likely to get worse before it gets better, with as many as 62,000 finance-related jobs forecast to be lost in London by the end of next year.
Interestingly, the properties least affected by the fall in values are those worth more than five million pounds. With the pound sliding it becomes more attractive to wealthy overseas buyers (yes, they still exist) and given the uniqueness of many of the properties in this category, and how infrequently they come onto the market, they still are highly sought after.
Appreciating that for a buyer with US Dollars, a 15 percent property valuation drop equates to a 35 percent slide when exchange rates are taken into consideration, property in excess of five million pounds is great buying.
It’s worth imagining what 2009 could bring. I am a not a pessimist but it is worth glaring into the crystal ball and letting go of today and dreaming – dreaming it is December 2009.
Has the US Fed pumped trillions of dollars into the US economy and what has been the result? Have property prices stabilized and how is Citibank going? Has the bailout really cleaned out the poisoned loans? Let’s dream!
We have bailed out the 3 car manufacturers and we have bailed out the banks. The banks have hoarded money and monetary policy is having no effect. Interest rates are at the lowest level ever – 0% and the Dow is hovering around 5000 points. Superannuation has lost trillions and those that would be retiring have realized that another ten years of work is required (at least) to make retirement possible.
Small and medium manufacturers are all but gone – car companies are waiting to get supplies and difficult car finance is all but crippling sales. Many of the smaller car dealerships have closed, finding the credit crunch a hard go and the larger dealerships holding too large an inventory are closing. Surely more money will solve this, but maybe not! With monetary policy crippled what can President Obama do?
The Fed has decided to pump more money into the economy and inflation is now an issue. Inflation is a real problem, with OPEC deciding to reduce supply by a total of 10 million barrels a day to increase the price of oil. Their greed has accelerated issues in the economy with transport companies struggling to get paid by clients, forced redundancies and supply train chaos ensue.
Credit scarcity has caused loan delinquencies to flourish with 5 million US households in foreclosure. Prices continue to fall and Citibank is on a downward spiral. What are the options for President Obama? Let Citibank fail or pump yet more money into the economy? This will force the US dollar to fall even further and prices are going up and up.
The US economy is now at breaking point with reliant economies collapsing. There is no savior to come to the US aid – the world is simply not capable of saving the US as it’s too big. Japan and the EU are crippled. Is the US in recession, depression or bankrupt? With trillions of dollars of debt President Obama has few options.
This chance to imagine is just one example of what could be. There are so many variables and so much left to be answered. This situation would cause so much grief and I am an optimist, hoping and praying that our leaders find solutions to the problems we face. Solutions that are not only needed but vital to the livelihood of so many families and vital to the survival of the world superpower that we so rely on for our economic and military security.
Australia’s economy will avoid a recession next year, helped by lower interest rates, government spending and exports.
A recent Report (Economic Outlook No 84) by the Paris-based Organization for Economic Cooperation and Development (OECD) stated that the Australian economy will grow 1.7 percent in 2009 from 2.5 percent this year, before accelerating to 2.7 percent in 2010, despite the depressed international economic environment, the impact of the financial crisis and the fall in the terms of trade should be relatively contained within Australia.
Furthermore, the OECD expects the Australian unemployment rate will increase to 6% from 4.3% by 2010 but inflation will ease.
The forecast is relatively glowing for Australia when compared to the other major economies of the world, stating that 21 of the 30 member economies of the OECD will go through a protracted recession of a magnitude not seen since the early 1980s.
In recent weeks new property listings have shown a substantial decline and this is likely due to the proximity of the Christmas period. Michael Marquette
A survey of 18 economists by the Australian Associated Press revealed the following:
- All 18 economists believe the RBA will cut interest rates
- 11 economists expect the rate to drop by 0.75% (75 basis points) putting interests rates at 4.5% (the lowest since June 2002)
5 economists believe the cut will be 1% (100 basis points) leaving interest rates at 4.25%, the lowest level ever.
Time will tell who wins the bet, but home owners and buyers alike will be the winners of any rate cut.
“Bailout” has been named as the “Word of the Year”, being the word that has been searched the most in online dictionaries and has become suddenly infused into daily language. “Turmoil” was up there too!
Things may be worse than they were perhaps a year ago, but please take a moment to think of all the good things. During this Thanksgiving holiday – an American institution that surely everyone throughout the world should recognise – be thankful for what you’ve had, what you are, and what you can be.
One of the phrases Marquette Turner has coined is “Luxury is…” – this week we share with you some comments people have shared with us.
Please enjoy the stories in our blog, or you can go straight to the e-magazine. We thank you!
“As we express our gratitude, we must never forget that the highest appreciation is not to utter words, but to live by them.” John Fitzgerald Kennedy
Whatever level of real estate, at whatever price, there are still numerous stories of people that, whilst not necessarily “doing it tough” are still struggling to find success in the current real estate market.
The world’s greatest ever tennis player, Pete Sampras (based on Grand Slam titles I must add, before I get heaps of corrections!), recently sold his 10,000 square foot mansion in Beverly Hills, California for $2 million USD less than the $25 million USD he was looking for when he put it on the market in January 2008, having paid $8.3 million USD for the six bedroom property in December 2001.
For those interested, the property has six bedrooms, 12 bathrooms as well as its own guest house, gym, tennis court, and theater.
Part 2 of a 2 Part Investigation
The low sales volumes that we have seen in 2008 have resulted from fear, necessity and pride. Each has played a role in reducing the number of sales.
In so much as fear has contributed people are always cautious during times of upheaval or unrest.
Economically it has been a minefield of a year with Sydney property prices generally being stable or heading south. The stock market has shed billions of dollars and nervous investors and even more nervous fund managers have either panicked or halted all activity to see where it would lead – we certainly have a good idea of that now.
As interest rates increased early in 2008 many people feared that the return of Labor to the Federal Government would bring devastatingly high interest rates and therefore chose not to buy – again they played a wait and see game.
Vendors, convinced that the economic bliss was sure to continue refused to accept lower prices from buyers and the number of unsold properties has increased as the year has gone on. The financial turmoil has seen companies tightening their belts and in some cases withdrawing benefits, bonuses and international transfers.
This has greatly affected the number of “Private Brokerage” level sales and has played havoc with the top end Luxury rental market. Without companies paying absurd amounts of money to house executives the demand for top end rentals has all but dried up – with Luxury Landlords accepting massive cuts in rental amounts, moving back into properties or simply leaving them empty (Not very smart in most cases).
The final and least understood factor that has resulted in decreased “Private Brokerage” level sales is the age old problem of pride. The uncertainty that the year has provided has caused many would be vendors to reconsider plans to sell in case they were seen by family, friends, colleagues and competitors as potentially having financial problems.
It has been reported in Sydney newspapers that journalists were waiting to see which Luxury Homes were put on the market as this may have been an indicator that a company or associated interest was struggling and in need of cash. It is amazing what people will do out of pride and emotion has played a huge part in the decreased sales volumes we have seen.
Fundamentally Sydney is well positioned. It has stunning natural beauty and there is a low rental vacancy rate and net immigration is quite high putting further demand on housing in the city. This should see the market steady and confidence return in 2009, however we cannot ignore the differences between average or low end property and Luxury “Private Brokerage” Sales.
Click on the link for PART 1
It seems that no matter who you are, the credit crunch is snapping at your heals. And, as we seem to be hearing more and more each day, people from all walks of life are losing the battle.
Michael Jackson, he of the world’s biggest selling album of all time, “Thriller” (and on its 25th anniversary of being released) and (once upon a time) the undisputed King of Pop, has been forced to sell his ownership of his Neverland ranch near Santa Barbara in California.
Earlier this week, Jackson, 50, filed legal papers making the Sycamore Valley Ranch Company the new owner. Jackson, whose huge catalogue of hit records includes Billie Jean, Thriller and Man in the Mirror, has not lived at Neverland since he was acquitted of child molestation charges in 2005.
The property was bought in 1988 for $28 million and is situated on 2,900 acres, with a 14,000 sq. ft. main house
Jackson initially sought to turn into a fantasy land, and is ironically named after an island in the story Peter Pan, where children never grow up. He built a zoo and fairground on the 2,800 acre (1,100 hectare) property but it was closed in 2006 after Jackson failed to pay his staff or maintain proper insurance. It is not clear what will now happen to the property.
Over the last month or so I have had numerous discussions with people from all around the world about the level of Stamp Duty we pay in Australia on property transactions. In my opinion it acts as a huge disincentive for people to transact and puts additional and unnecessary barriers in place for buyers and vendors alike.
For those that aren’t aware buyers in NSW pay around 4% tax to the State Government – in addition to the purchase price of their property when they buy.
Who can forget the effect of the vendor duty that the New South Wales Government (for our international readers, Sydney is the Capital City of the State of New South Wales – NSW) decided to charge on the sale of investment properties. That 2.25% duty on the sale of investment properties (paid by vendors to the Government – calculated as a percentage of the total sale price) stalled the sale of investment property in the State and made purchasing investment property look very unattractive.
Thankfully common sense prevailed and the duty was removed. New South Wales lost hundreds of millions of dollars to States like Queensland as investors chose to purchase elsewhere. South East Queensland did very well out of what can only be described a shocking decision. So what would happen if New South Wales slashed the stamp duty paid by purchasers? Would we see huge amounts of investment coming into the State from Queensland, Victoria and other States?
It’s an interesting question and one I’d like to see debated as increased taxes, tolls or duties is not the way to stimulate the economy. New South Wales is a wonderful part of our country and Sydney is one of the most beautiful cities in world – if only we had a State Government to match.
Resources: Buying Advice
It’s difficult to watch the television, read newspapers or generally go outside of your home right now without being bombarded with negative news on the economy. The US economy is all but in recession, New Zealand is already in recession, Japan is in recession and as of today so is the United Kingdom.
The Governor of the Bank of England has predicted no growth in the UK in 2009 and believes that the recession will be as bad as the early 1990’s. The British Pound has hit a six year low against the Euro and inflation in the UK is currently at 5% (the target set by the Bank of England is 2%).
Deflation is now a real threat in the UK which can be just as concerning as inflation. Deflation refers to a general decline in prices, often caused by a reduced supply of money or credit. It can also be caused by a decrease in spending by Governments, consumers or investors. Deflation is simply put as a decrease in price due to decreased demand – therefore the decreased demand results in decreased production and increased levels of unemployment.
With this deflationary threat looming it is likely that we will see interest rates continue to fall with some economists predicting UK interest rates will drop to around 1%. The recent massive 1.5% rate cut in the UK and two consecutive monthly cuts in Australia (1% and 0.75% respectively) are sure signs that central banks have finally seen just how serious the current situation is. I believe it’s a perfect time to purchase property safe in the knowledge that interest rates are going down – this is a wonderful situation.
In a world where the barriers of Nation States are barely barriers and the society and economies are global in every way, the victory of President-Elect Obama has caused excitement throughout the world that is similar to the fall of the Soviet Union and the bringing down of the Berlin Wall.
It has been a monumental week for the United States and the entire world and we extend our congratulations and best wishes to President-Elect Obama and his new administration.
He enters office at one of the most important points in world history- the US is at war in Afghanistan and Iraq, Iran and Pakistan are perhaps greater threats than North Korea, climate change fear is extreme and the need for alternative energy sources has never been more urgent and the US and world economies are in the biggest state of crisis since the Great Depression and business and consumer confidence is shattered.
I don’t envy his position but I am proud of our friends in the United States for so convincingly offering Obama a clear mandate to fulfill his promise of change. Change was needed and the United States as the engine room of the world is vital in the success and prosperity of so many nations – Australia included.
I wrote an article which is a must read which detailed the size of the American economy compared to China, UK, Japan and Germany. We can also look forward to the announcement of key cabinet positions and I believe it will be a bi-partisan administration.
The election of Barack Obama changes the world’s view that America is a racist nation and his message of ‘spreading the wealth’ provides a welcome corrective to the failed Wall Street mantra ‘greed is good.'(Thank you Henry Thornton).
I’m excited to see what reforms are put into place – including financial regulation, health, education and welfare. As an Australian we enjoy so many safety net protections (although they are far from perfect) and the US reforms may lead to benefits throughout the entire world.
George W Bush has spent like someone spending other people’s money (maybe things would be different if it actually was money coming from his own bank account) and Obama has to resolve this situation as well as a host of other things already discussed.
He is a classy, charismatic man who appears genuine and committed to change for the good of all. He has so far relied on high quality advisers, has kept his nerve, been rational and displayed an infectious level of energy. Good luck President-Elect Obama.
The economic storm is penetrating every corner. The Bank of England’s Monetary-Policy Committee (MPC) has pulled of shock when most thought there are almost no surprises left: it has cut UK interest rates by 1.5% leaving them now at 3% – the lowest level since 1955.
The boldness should be commended, although it clearly demonstrates that they were shocked themselves by the rapidity of the UK’s contraction, as well as the global downturn. Though consumer-price inflation, at 5.2%, is high, the bank reckons that the collapse in commodity prices and the prospect of weaker growth means there is now a “substantial risk” that inflation will fall below its 2% target.
Furthermore, British GDP fell at an annualised rate of 2% in the third quarter, factory output fell for a seventh successive month in September, new-car registrations fell by 23% in the year to October, and house prices fell by 2.2% in October leaving them 15% lower than a year earlier. Things are indeed looking grim.
Also this last week the International Monetary Fund (IMF) revised its economic outlook stating that it envisages Britain’s economy shrinking by 1.3% in 2009, and that of the euro area by 0.5% – the European Central Bank has also just cut rates by 0.5% perhaps indicating that the ECB is not recognizing the global tsunami soon enough. Simon Turner
Part 1 of a 2 Part Report (read Part 1)
Yesterday’s rate cut of 75 basis points 0.75%) was the right decision by the Reserve Bank of Australia (RBA). Fifty points (0.5%) definitely would not have been enough after the release of some of the worst economic data in many years. I had predicted in an earlier E Magazine that the cut would be approximately 100 basis points (1%) but the Reserve Bank chose the 75 point cut – maybe concerned that two consecutive monthly cuts of 100 basis points (1%) would look like panic.
After the October rate cut of 100 basis points (1%) the markets enjoyed a short lived spike but since then shares have fallen 11%, the dollar 8.2% – in fact since July the Aussie Dollar has been in freefall from around US98 cents to around US66 cents and every piece of economic data since has shocked on the downside.
So, the October interest rate cut was a huge success – just no Australian seems to have benefited. The new conversation points from the Reserve Bank Governor are China’s economic slowdown, significant weakness in industrialized countries and weaker domestic spending than expected. “.
The Reserve Bank has blood on its hands – they have run monetary policy with a single inflationary vision. Australia has been exceptionally fortunate to benefit from the age old reliance on digging up the country – the resources boom.
The problem is that metal prices are down about 35% this year and coal is down around 50%. Given that entrepreneurship is barely encouraged in Australia and schools teach children to get a job and become employees, what is next for the country?
Last night a US central banker used the word “deflation” and told Bloomberg that there would be no growth in the US next year and that inflation had been “vaporized” – meaning that prices are likely to fall for a period of time. Our Reserve Bank couldn’t see this coming and see that this might affect us?
The fact is that the RBA has been caught with rates way too high and their obsession with controlling inflation is now backfiring as Australia “suddenly” heads toward a recession. The foresight of these people are in line with the “fat cat executives” who suddenly work out that their companies have no money – with all of the models and supposed analytical data at their disposal they seem to find it difficult to look out the window let alone ahead several months..
The official cash rate should be another 1.5-2% lower (at least) than it is now. NSW is a basket case of a State and is in recession – the only Australian State that is – but who will be next to follow? New Zealand is in recession, so is Japan – but the RBA was caught off guard. How?