Smaller mortgages are the trend with Australians nowadays as house prices soften in Australian capital cities.

Australians have been observed nowadays of borrowing less as homes for sale prices slide.

This trend has further cemented to the Australians the culture of reducing debt which was brought about by the global financial crisis.

According to the data from AFG, Australia’s biggest mortgage broker, people who were pulling out mortgages in June signed up for smaller loans proportional to the value of their property, which are loans representing a lower percentage of their property’s value than at any time during the previous six months.

With prices of design house sliding, Australians are borrowing lesser amounts which are in proportion to their property prices.

Statistics reveal that the average loan to valuation ratio (LVR) was 64.2 per cent nationally and the average LVRs is declining in NSW, Victoria, South Australia and the Northern Territory.

As house land package prices soften, Australians are signing up smaller mortgages. And in June, it was revealed that the average mortgage size across Australia was $384,042, which is about 1.1 per cent lower than the previous month.

All throughout the states, the average mortgage size waned except in NSW and Western Australia, where a growth of 0.5 per cent and 3.3 per cent, respectively, was being observed. However in WA, the average mortgage size increased from $399,000 to $412,000.

Meanwhile, as a positive sign of the gradual recovery of Queensland from last summer’s floods and natural disasters, mortgage sales reached the same level in June as they did in the corresponding month a year earlier for the first time in five months, which indicates confidence in the market is returning.

However, the residential property landscape still remains unresponsive, with the annual housing credit growth showing a slow down to almost 6 per cent, as compared with an average 14 per cent over the past 34 years.

Likewise, a slowdown in household credit and in most values of assets including housing was also noted.

However, the central bank gave borrowers another chance for respite, in which the overnight cash rate was left at 4.75 per cent.

Meanwhile, Jonathan Mott, a UBS analyst, told clients last week that the housing credit growth was expected to slow down with further thanks to the recent pressure on household budgets caused by higher interest rates and utility, food and petrol prices.

UBS predicts that the housing credit growth will slow down to 4 per cent by the years 2013, and the personal lending will fall to 2 per cent.

Good News

People who are intent on borrowing or refinancing are being offered many deals due to the fact that big banks are jostling in to grab another 1.7 per cent share of the mortgage market in June from smaller competitors.

AFG’s general manager of sales and operations, Mark Hewitt, says that big banks now have 82.1 per cent of the market as these major lenders are hungry for business.

Meanwhile, non-major banks took 21.3 per cent of the refinancing deals and 23.8 per cent of first home buyer mortgages in June.

The big four have gained more toeholds since March, due to the fact that 25 per cent of first display homes buyers and borrowers who are seeking to refinance have chosen to borrow from a smaller bank or non-bank lender.

Australia has been known to have the largest dwellings in the world and these houses are noted to be of high quality, with the average Australian house estimated at 214 square meters.

Now, the sizes of Australian houses have shrunk as potential home buyers are being offered new house and land packages that is a quarter the size than what was supposed to be before.

The shrinkage is blamed on the changing household preferences.

As Australian households are now apparently demanding lower maintenance homes, home builders, looking to meet the market, now offer more affordable house-and-land options, with lot sizes being squeezed into a less than 200sq m lot for the first time.

Likewise, backyards which have been reducing in size for decades and in recent times have been swallowed by a pool and deck may shortly disappear.

The downsizing trend in the homes for sale is said to have surged in the US since the global financial crisis and has sprung up in Western Australia, South Australia as well as in Victoria.

Australian house builders are now making certain that they are ready for the arrival of rear-loaded blocks or laneway, which are lots where a garage is built at the back, allowing car access via a laneway.

The era of the McMansions had ended as small lots are now in demand.

However, though changing household preferences could be one of the causes of this shrinkage, the main reason behind this shrinkage unfortunately is attributed to the government’s urban consolidation policies since the early-2000s which includes the implementation of urban growth boundaries around Australia’s cities as well as more restrictive zoning.

These policies have significantly driven up the prices of fringe land, which have both compelled the move to smaller block sizes in order to maintain some appearance of affordability as well as pushing-up the prices of new and pre-existing display homes.

Affordability as well as Livability

With this recent development, potential home buyers are likely to see house-and-land packages being offered at a price around $320,000, which is quite affordable.

Three-bedroom homes with an ensuite, double garage at the back, walk-in robes and a drying court are also likely to be offered.

Plans on introducing a range of affordable housing and smaller block sizes into its communities are also on the works.

Australian developers are aiming for affordability as well as livability in building these new houses. A more efficient block size situated near parks, public transport, places of employment and other amenities will more likely make people less reliant on their cars.

Though home builders admitted that yards would likely disappear and “terrace” block sizes would be as small as 7.5m by 25m (187sq m total), the loss of the yard  have only followed a trend where people are contented to have low-fuss outdoor areas and are happy to pursue social and sporting interests away from home.

The rise of the small block houses is said to be inevitable as smaller house and land packages would open up the market and would be a better use of resources.

As Australia’s housing market remains locked in the doldrums, its new home sales are at its slowest pace this year in April.

A survey shows that Australia’s new home sales are flat and are showing signs of dropping to levels seen throughout the global financial crisis.

The number of new houses for sale in Australia sold edged up by a seasonally adjusted 0.2 per cent in April to just 11,000, according to the latest Housing Industry Association-JELD-WEN New Home Sales Report. The said sales is seen to be the weakest since sales shrank in the final two months of 2010 at less than the 4.3 per cent increase reported for March.

The national picture was a muddle with detached house sales just increasing by a measly 0.4 per cent or offsetting the fall of sales of multi-units by 2 per cent, which marked a third consecutive monthly decline.

With the risk of further interest rate hikes in 2011 which causes the household sector to be cautious and nervous, residential construction is seen to plummet in the depths endured during the global financial crisis.

With the predicted interest rate increase in 2011, people are now more wary in buying houses as their income is not enough to shoulder another burden.

This cautiousness of potential home owners causes the slow climb of new home sales in the housing market.

HIA’s chief economist, Harley Dale, said that the small and medium-sized businesses which are considered the life blood of the housing industry are harassed by the burden of high costs and slower demand.

Overall sales to date of new detached homes for sale, Australia sales are persisting at a volume 22 per cent lower than the long term average while the sale of multi-storey units dropped by over more than half by 2 per cent to their third monthly slide in a row.

With these developments, the industry’s outlook remains poor, as the profile shows a weak new home building conditions rampant in 2011 though there is an increasing construction activity and a growing housing shortage. However in all likelihood, the housing industry is seen to be declining over the foreseeable future as another rate hike is foreseen in the near future.

Dale agrees that the Reserve Bank must set interest rates for the whole of the economy but it would negatively affect the building industry if higher rates are created.

Australia houses for sale and home builders are in jeopardy by these recent developments.

With Australia’s housing market stalling at the start of 2011, it has experienced a drop in auction clearance rates at 60 per cent level as compared to the 80 per cent rate in the Melbourne and Sydney last year.

Auction clearance rates are used as a barometer of overall demand.

Slashing of the bank’s lending rates for some of their home loans are seen to be undertaken by banks as a bid to revive the market.

According to Dale, the housing industry needs a kick-start as well as a reinvigoration of the reform process as the new home building industry is fraught with the burden of excessive taxation and regulation, stalling housing supply reform process, and ambiguity over interest rates.

The problem in Australia houses for sale prices has been bugging the property market for a number of years. The softening of the property market has become a serious issue as many problems have cropped up that affect the property market.

Just recently, it has been in the news that according to a top government advisory body, regardless of a strong demand in key areas and a loss of affordable housing, a projected feature on the property market for this decade is a flat property prices.

However, Owen Donald, the newly reappointed chair of the National Housing Supply Council (NHSC), said that though the Australian residential property is still an attractive proposition, investors in the property industry need to get accustomed to receiving smaller capital gains and hundreds of different markets.

Shortages of homes for sale in some areas for some segment of the population has been observed as well as an oversupply of house for sale Australia, though probably only short term, in other markets.

Flatness in prices is said to be an expect feature of this decade but nevertheless, significant potential for investors as well as significant shortages could still be expected in this property market.

Speculations and facts on why house prices are going down have been on the news for a while.

According to Tim Lawless, RP Data’s research director, the falling home prices is chiefly a payback for the over-exuberant price growth that Australia experienced in the years preceding the global financial crisis.

Otherwise, Mr. Donald, in charge of delivering the 2011 annual state of supply report to the federal government, said that a house prices growth was doubtful to return in a hurry.

A lot of stock houses are being added to the marketplace, as home builder continues to construct more houses as the last month of the first quarter of 2011 has seen a rise in Australian residential building approvals resulting in lessening price pressure in the property market.

With Australian home builders busy in constructing house units in reaction to the increase in building approvals and a surge in the number of people looking to sell while buyers are being cautious in the face of higher interest rates and stricter home loan policies and, an across-the-board weakness in property prices is now occurring in Australia.

A problem in oversupply versus urgent demand is also happening in the property market.

A perceptible conflict involving the state of the market, regarding with oversupply in some areas and unmet demand among first home buyers in other areas, has been occurring in the property market.

With the oversupply of new apartments in areas such as south east Queensland, Melbourne’s Docklands and Canberra, banking and property analysts are giving Price correction warnings in some housing markets.

A shortage of more than 200,000 apartments and houses nationwide, more than 20,000 above the Commonwealth Bank’s estimate of a shortfall of 170,000 to 180,000 dwellings is happening across Australia.

The Australian property industry is worried that only half the number of new homes required is being built in Australia.

With these Mr. Donald said that it is imperative to address this problem for it may put more pressure on those people and on the building industry.

Caryn Kakas, executive director of Residential Development Council of Australia, said that though new homes were being built at half the rate of demand, we are still sitting around record lows.

Though the nation had an efficient building industry; however, because of poor forward, planning in housing and infrastructure the developers and investors had no long-term certainty.

With the increasing number of first-home buyers snatching up apartments and townhouses that may otherwise have been bought by investors, first-home buyers are now acquiring the benefits brought about by the sluggish Perth housing market.

According to the Real Estate Institute of WA, investors had lost interest in buying house & land packages due to the city’s over-priced properties; thus, decreasing competition and forcing down prices of house plans designs, particularly for multi-residential properties which usually attract investors.

March quarter figures released by REIWA’s this week has showed that the median price for a grouped dwelling that includes apartment, unit, townhouse or villa in Perth has dropped by about $7000 to $402,000, while outside the capital it fell about $2000 to $325,000.

REIWA president Alan Bourke said in his statement that investors often preferred multi-residential properties but they are thin on the ground.

Recent property market conditions appear to be in favor of first-home buyers who have been reasonably active and represented about 23 per cent of buyers during the quarter.

According to the latest state government data, the median purchase price in Perth for first-time buyers was $415,000 and $325,000 for those in regional areas.

The statistics follow Premier Colin Barnett’s controversial comments this week which persuades first-home buyers of home designs to lower their expectations to enter the market.

During the March quarter, healthy first-home buyer activity was in disparity to existing home owners looking to trade-up.
According to Mr. Bourke, many of them were “caught in a bind”, unable to commit to selling before buying, causing the property market to stall.

This week, WAtoday.com.au revealed that the state’s property market had fallen into the worst fall in nearly two decades.
According to the government’s official land information authority, Landgate, in just 12 months, activity in the housing market has declined by 15 per cent while more than one-third since the height of the boom in 2005-06.

Even though during the March quarter sales activity had improved, according to REIWA, the overall turnover continued to remain 25 per cent below average in Perth and 35 per cent below in the country.

It had turned out to be a buyers’ market, with 50 per cent more homes for sale than required to meet demand, Mr. Bourke said.

To get the deal done most home builders are reducing their asking price by around 7.5 per cent while sellers who need a quick sale just simply adjust their expectations and asking price before going to market.

On the other hand, according to Mr. Bourke, the fall in median price from December 1 was expected to be only 1 per cent.

Mr. Bourke additionally stated that preliminary data suggests that for the March quarter, the median house price will be about $485,000 for Perth and $375,000 elsewhere.

The rental vacancy rate has tightened regardless of a flooded market and has led to the first increase in rental prices in 12 months.

During the March quarter, rents rose by $10 to $380 per week in Perth, while the vacancy rate remains just above 3 per cent.

Mr. Bourke explained that typically, when the market is flooded with properties, many investor-sellers decide to withdraw their listings until conditions improve and shift their properties into the rental market which relaxes the vacancy rate. However, this doesn’t seem to be happening at the moment.

Australia’s display home vendors are facing a weakening winter demand if they are not prepared to meet the market with the stock levels slowly increasing over the next few weeks.

With the recorded rise in Australian residential building approvals seen in the last month of the first quarter of 2011, home builders have been quite busy constructing units in support of these increased building approvals.

However, if Australian vendors of house and land package are not prepared to meet the market, they would surely encounter a softening of the house for sale market with the flagging winter demand.

Of the weekend’s 577 reported auctions, the clearance rate was 60 per cent, where it has been hovering since February.

According to Adrian Jones of the Noel Jones Agency, his agency had only sold six of its eight auctions, which includes the current church site at 14-16 St George Crescent, Ashburton.

Jones recalled that seven bidders fought to bid for the block, which is the church site at St George Crescent, Ashburton, that covers 2400 square meters. The church site was on the market around its quoted price of $2.5 million, before it was sold for $3.21 million.

Mr. Jones further commented that ”It sold for well over the expected price and just goes to show that if you have the right property at the right price, the public will come out and bid for it.”

Another property sold by Mr. Jones is at 34 Acacia Street in Box Hill which was sold under the hammer for $1,084,000 but was sold for $900,000 about two years ago.

These comes to show that Australians have become more concerned with the prices of design house and are more vigilant on buying expensively priced house for sale.

”The marketplace is much more price sensitive and people are more cautious about paying record prices, but when you put the right property on the market, people will compete.” Mr. Jones said.

Ruth Roberts of Woodard Carnegie said that her agency had multiple bidders and had sold their two Sunday auctions in Glen Huntly.

Roberts explained that nowadays bidders are being cautious; however, buyers are also focusing their attention to better properties.

Leading Agents of Australia has released its annual sales figures and stated that “buyers are now in a better position to enter the higher end of the market”.

Jock Gilbert, LAA chairman, said that ”After years of consistent growth there has been recent speculation of a housing bubble.”

Gilbert explained that though there is evidence of a slowdown; however, the figures indicate that Australia is now experiencing a more even playing field for vendors and buyers, rather than a slump.

In the meantime, Peter Rogozik, a buyers’ advocate said that the overall auction figures did not essentially mirror accurately what was a segmented property market.

According to Rogozik, the secondary location properties were undergoing price corrections, or reductions, of about 5 per cent.

Rogozik further clarified that ”However, the quality segment, which represents a very small portion of the market, is still holding up well.”

Frank Valentic, Advantage Property Consulting’s, said that for his client at 59 East Boundary Road, Bentleigh East, a realistic reserve contributed to a strong result.

Recently, it has been in the news that according to a recent rental market survey, seven out of ten tenants are looking to buy home for sale but until their dream of owning new houses for sale in Australia comes true, most want to stay in their present accommodation and are willing to pay more in rent to do so.

Michael Matusik, Property commentator, reported that two-thirds of the renters surveyed say that they are prepared to pay up to 5 per cent more in rent to stay put in their rental spaces, with a further 30 per cent saying they would accept an even bigger increase in rent just stay put.

It was found out from the survey that those who live in apartments seem more willing to accept a steeper increase than those renting detached dwellings.

Out of every five renters surveyed, two renters think that the rental market in their area is balanced; with another one-third that were surveyed saying that it is undersupplied.

When asked what they would do to avoid an increase, 43 per cent of the respondents  said that they would move to a less expensive area, 37 per cent said that they would move to a lesser property in the same area, and 19 per cent said that they would sub-lease or share to meet the costs.

Matusik says that just like the owners, renters don’t really move that far when it comes to finding new houses for sale even if made by the best homes builders.

The survey also revealed that close to one-third of the respondents find new accommodation in the same suburb they already live in, while nearly one-half move to a neighboring suburb.

While the same survey last year found a strong move towards the inner areas; however, this year’s survey has found out that more renters are choosing to move a bit farther out.

Predictably, number one of the seven most important things tenants consider with regard to rental accommodation is the dollars forked out in rent.

Recently in the news, it has been reported that the number of loans from people who want to buy new houses for sale have dropped.

According to the report, residential property prices have increased in 2010 and will continue declining in the next six months as big mortgage brokers report a 20 per cent plunge in loan numbers.

Many home for sale will be affected by this situation.

Mr. John Symond, Aussie Home Loans managing director, said that its new loan volumes had dropped 20 per cent in the past four months for the reason that the housing market has become soft.

Mr. Symond added that the Aussie had kept its 5 per cent share of the market and, until December last year, usually settled $1 billion worth of new home loans a month.

Mr. Symond reiterated that the general consensus is that the market is down around 20 per cent in new loan volumes.

This makes the houses for sale market in jeopardy. Many newly formed families are now delaying to execute their house plans for their new family as the property market is down.

Many newly formed families are hesitant to take on a loan with the still on going global economic crisis which has affected first home buyers, thus reducing the number of house buyers resulting to the housing market becoming soft. This means that with the number of first home buyers risking to take on a loan, the number of first home buyers who want to pay the sellers price are also dwindling resulting in the property market favoring towards the buyers.

Mr. Symond said that in general, housing throughout the country is certainly in a cooling stage which is swinging towards a buyers’ market particularly for properties above $700,000 or $800,000.

Mr. Symond further stated that Australia’s housing market is beyond the peak of the cycle and will probably go on to soften over the next six months.

Currently, the housing market in recent months is now starting to get soft and is still estimated to get soft in the subsequent six months.

Though, property prices close to the city are still quite competitive.

Mr. Symond said that the cheaper prices close to the city, with the ranging prices up to $600,000 or $700,000, are still quite good for the reason that first home buyers and small investors are all vying for those prime properties.

Mr. Symond further added that the competition among brokers had not intensified in spite of a host of post-global financial crisis mergers and acquisitions in the sector, making the industry more concentrated.

With this development, the property value for homes for sale are now significantly decreasing with the softening of the market; however, even with these development, many first home buyers are still hesitant to take a loan due to the ongoing global crisis leading to new home  loan takers plunging.

With the softening of the market, many are commenting that it is best that the prices of houses for sale are significantly down at this time while there are still jobs around.

However, the problem is with fewer couples risking to take a loan, though the property market is down, many houses are now without buyers.

Australia has had its hard times recently. It has experienced different challenges which shook its people a little. It has made people realize that nature sometimes shows us things we can’t imagine happening. Nature sometimes gives us a wake up call for people to change. Thus, mother nature showed its rage on Queensland and brought forth flood into the land. It was a devastating thing to happen. It was a horrific unforeseen event for everyone even for those away from the scene. It is such a tragic thing that most people can’t imagine trying to be in that situation. Yet survivors are brave enough to conquer such reality. This situation really affected the economy. It has brought about some hesitations and doubts regarding opening up businesses and buying houses for sale in Australia.

Thus, it has been noted that new homes for sale in Australia went only a little up high in their sales this February but this growth is still considered weak for the market.

The Housing Industry Association – JELD-WEN new home sales said that there was a 0.6 per cent rise in February, following a 2.5 per cent rise in February. House sales also went up by 1.5 per cent in the month. On the other hand, apartment units and townhouses decreased by 7.6 per cent in the month.

According to the HIA chief economist Harley Dale, new houses for sale are in volumes now but it is nothing compared to the periods of 2009 and 2010. It is also sad to note that both local government building approvals and new housing loan approvals are less granted.

Other problems which arise in the housing market is the Auction clearance rates in Sydney and Melbourne which went down from 80 percent to 60 percent.

Another big issue here is the overpricing of the home for sale in Australia which brings about hesitations in most first time buyers. The tendency of these buyers is they will be willing to wait for these prices to go down. However, it would take a long time before these buyers will take action by buying a house for sale. Thus, it is expected that this 2011, it will be a little weaker this year for the housing market.

But signs of optimism are shown in New South Wales. Sales rose up to 0.9 percent in February while in Victoria, it rose as high as 2.9 percent. In Queensland, they dropped 13.3 percent due to the recent flood. Another 4.3 per cent decrease is seen in South Australia and 2.2 per cent in Western Australia.

These are just but the outcomes of the recent calamities hitting Australia. It really affected the whole community. But there is no time for grieving and depression anymore. It is already time to stand back on their feet and try put things back the way they were before. It is time to restore what has been broken and let those bad memories be a thing of the past. In this way, Australia will be another nation we look forward to shine and flourish again.

Everybody needs a home they can call their own. Thus, every family prioritizes acquiring a home first above everything else. In Australia, a lot of the building industry is aiming at providing the market with houses for sale or house and land package.  New home plans are being shown to lure would-be buyers. Recently, the market has its ups and downs which resulted from different catastrophes and other reasons which affected the buyers and the market. It is a great struggle for both parties to be able to stand back on their feet. It is hoped that buyers will be able to get enough wages to acquire their houses while the building industry is hoping to get enough buyers to break even.

Now, ANZ is optimistic enough in reassuring the global investors about the condition of the Australia’s property market. They have sent a senior executive to speak at a Hongkong conference and assure its audience that the fundamentals are sound.

Property prices and consumer debt levels are expected to be scrutinized as the Reserve Bank recently released its half-yearly glimpse on the condition of the nation’s financial system.

Phil Chornican, ANZ’s Australian operations boss, recently spoke at the Credit Suisse Investment conference and said positively that the fundamentals of the Australian economy were supportive of house prices. It also noted that shortages in housing stock supply supported the pricing levels.

Australian bank executives are under a lot of scrutiny and questioning about the health and condition of the housing market during global investment forums. In recent years, the North America and some parts of Europe suffered a little, that is why most people would believe that the Australian market will experience the same and that it will not be able to sustain itself.

The Economist magazine reportedly said that a survey has been done regarding the estimation of the Australia houses for sale and noted that it has been overpriced by 56 percent. It is the highest.

It is a fact that most local banks are lending its money for housing loans. Changes in value of these houses for sale in Australia would bring big impact on everyone else and will be a great deal for most investors. He then said that there is nothing much to worry about since this household debts are taken by households with higher incomes; thus, they have the capacity to pay their debts.

Though this news maybe good, still we have to be ready for whatever changes there are with the economy. This is because we will never know when a catastrophe will happen like the flood in Queensland which made an effect to the economy and the building and housing industries. These effects might have been positive but most of it was negative since it changed the minds of some potential clients who would’ve wanted to invest in Australia. Yet, these are realities we have got to accept and these happen for us to change and learn more in order to build a better tomorrow. Everything happens for a reason and that reason is for the better.