GLOBAL FINANCIAL CRISIS

 
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Headlines from July, 2007 to December, 2008

  • $1 million suburbs: Prices hit the roof

  • Winners, Losers in the millionaires' club

  • Minister tries to set land price: How Sartor is playing Monopoly with your future home

  • Living on the edge of crisis

  • Sell before you sink: Bitter advice from Aussie loans boss

  • Boom not helping battlers

  • West is depressed: Property prices fall as trendy east rises

  • Landslide: Values drop $450 a week as rates rise looms

  • Property crash: Broken dreams in an ocean of debt

  • Struggle to keep roof over family's heads

  • Interest rates pain: Double the trouble for struggling families

  • Trapped in a mortgage they just can't afford

  • Tale of two generations of home owners

  • Loan costs at highest in 12 years

  • Real estate franchises go under owing millions

  • Reserve Bank chief's Message: Raise rates and increase taxes

  • Depression of repossession surrounds us

  • Home is where the heartache is

  • Bully banks: Eviction threats scare homeowners

  • When shame hits home: You feel helpless, like you’ve lost everything

  • Dad driven to deadly despair by debt

  • Once well off, now forced on to welfare

  • Another day of evictions in Sydney

  • Joy and despair as banks finally act

  • New homes surge: Cash and incentives drive NSW housing recovery

 

 
 

July 7, 2007

Winners, losers in the millionaires' club

By Justin Vallejo

THE great divide in Sydney’s property market is more evident than ever, with more people becoming paper millionaires as others watch their house and land values dive.

The once-exclusive millionaires’ club has been thrown wide open, with 52 suburbs now boasting median house prices of more than $1 million.

But families already struggling with mortgage repayments will get cold comfort from the latest housing price research, which reveals the number of suburbs with property values below $300,000 almost doubled in the past three years.

The inner-west suburb of Haberfield, and Pymble and Roseville Chase on Sydney’s North Shore, are among eight new inductees to the millionaires’ club. Joining them are McMahon’s Point, Warrawee, Fairlight, Cammeray and Waverley.

Carol and David Paget found their dream home in Haberfield in November 2004 after a long search.

“We had been looking for a long time and it was just by accident that I found this place,” Mrs Paget said. “We did the standard thing and renovated the kitchen, lounge and dining. The garden is still yet to be finished; we couldn’t be happier.“

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Haberfield joins millionaires’ club stalwarts Vaucluse, Dover Heights, Clontarf and Double Bay, which tip the scales at more than $2 million.

According to RP Data-Rismark statistics compiled for The Saturday Daily Telegraph, 10 suburbs saw their median house prices fall below the $300,000 mark over the same period — Doonside, Summerland Point, St Andrews, Ruse, Killarney Vale, North Gosford, Tahmoor, Yennora, Noraville and Lalor Park.

“It’s showing how divided the city is,” Australians for Affordable Housing spokesman, David Imber, said. “The concern we have is that lower and middle income earners are being pushed out into areas with less employment and fewer social services.“

Rismark head of research Dr Matthew Hardman said Sydney’s overall median house price rose by 1.1 per cent to $515, 800 over the 12 months to April, edging its way back in front of Perth [$462,000] after falling behind last year. According to the RP Data-Rismark research, there are 131 Sydney suburbs with median house prices between $600 000 and $1 million, while most — 252 suburbs — fall in the $300,000 to $600, 000 range.

Suburbs likely to join the millionaires’ club within the next 12 months include Abbotsford, Strathfield, Cronulla, Birchgrove and Lane Cove.   

 
 
 

July 14, 2007

minister tries to set land price

how sartor is playing monopoly with your future home

 
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By Justin Vallejo
THE State Government and developers are sitting on enough land for almost 34,000 new homes in prime Sydney locations — keeping property prices at a premium in a bid to turn an even bigger profit.

While Planning Minister Frank Sartor blamed developers for holding back the land, The Saturday Daily Telegraph can reveal the State Government is the worst offender. According to the most recent figures available, the State and Landcom together owned 24 per cent of the land sitting idle in massive “land banks” throughout Sydney.

The thousands of parcels of land are in areas including Blacktown and Penrith in Sydney ’ s west, Campbelltown and Camden in the southwest, Pittwater and Warringah on the Northern Beaches and Wyong on the Central Coast.

Landcom is the Government’s development arm, with a mandate to provide moderate income housing. A Landcom spokeswoman agreed the land was being held back because of the weak property market.

“It is in no developer’s interest to do hundreds of millions of dollars worth of civil works if at the end you can’t sell the lots,” she said. “The development industry is led by demand. If there’s no demand there’s no point in releasing the lots.”

Other development companies accounted for 57 per cent ownership of the land while private investors held 19 per cent. The ownership split was revealed in the Government’s Metropolitan Development Program 2007 update from the results of an audit by the Land Supply Taskforce in May last year, when there were 24,306 lots of zoned and serviced land.

Entire estates remain empty in suburbs such as Baulkham Hills, where the median house price is $490,000.

Century 21 Kellyville principal Irfan Masood said there was massive interest in the Baulkham Hills Balmoral Rd land release precinct, which had 6315 lots ready for development and would command prices over $500,000.

“People just keep waiting for something to become available but there is such a small amount of that land is actually on the market,” he said.

While the number of zoned and serviced lots available for development in January was 32,825, the number of blocks being sold to homebuyers continues to fall.

The Housing Industry Association said only 311 blocks of land were sold in Sydney last December quarter, compared with 633 a year earlier.

A spokeswoman for Mr Sartor again pointed the finger at developers and a series of interest rate rise.

“Developers are not releasing blocks because the market isn’t right and that’s due to eight interest rate rises in a row since 2002, which is putting pressure on families ,’’ she said  

 
 
 

August 18, 2007

living on the edge of crisis

faces of the mortgage freeze on city fringes

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By Justin Vallejo

A CONDELL Park family forced to sell their dream home at a loss of more than $150,000 is part of the public face of a world mortgage crisis that has divided Sydney.

As the inner-city experiences a second real estate boom, struggling homeowners such as Hana and Ayman Itaoui in the city’s west and southwest have been left behind while Eastern Suburbs residents reap the rewards.

Sydney-wide auction clearance rates have reached their highest levels since 2002 but the Itaoui family haven’t been able to sell their five-bedroom, three-bathroom home for the past six months. They have spent $750,000 on the property since 2004 but after consecutive interest rate rises increased repayments to about $1600 a week, they have no option but to sell.

“We really need to sell now because the repayments are too much and my husband will have to stop working for six months after a knee operation,” Mrs Itaoui said.

“He needs a total reconstruction so we will have to sell the courier business and move in with family until we can get back on our feet. But before we can do any of that we have to sell our home. It’s a real slap in the face to have to sell for less than what we’ve put into the place but I’d be happy just to break even. The problem is that no one is interested in buying.”

After dropping their asking price from $649,000 to $599,000 there has still been almost zero interest from the area. The home, on a 650sqm block, was supposed to be where they would raise their family but with an interest rate now over 8 per cent they have been forced to leave before their first child, Markell, celebrates his first birthday.

“I’ll never buy a house again. I’d rather rent and be happy paying a reasonable $300 or $400 a week rather than the $1600 we are paying now. That is massive. Something we just can’t afford anymore,” Mrs Itaoui said.

Over the past six months auction clearance rates in Sydney have reached 61.5 per cent, the highest since 2002 when clearance rates were at 67 per cent, according to figures from Australian Property Monitors.

This time the market is being carried by the city, lower North Shore and Eastern Suburbs where about 75 per cent properties are being sold at auction. In the west and southwest, however, it is only about 35 per cent.

A Housing Industry Association report said the past three rate rises have increased the number of households suffering mortgage stress by 77,000 — up 14 per cent to 624,000.

 

SELL BEFORE YOU SINK

Bitter Advice from Aussie Loans Boss

By Justin Vallejo

STRUGGLING homeowners would be better off selling than holding on in the hope property values will increase over the next few years, Aussie Home Loans boss John Symond said yesterday.

The warning came as the governor of the Reserve Bank ruled out an immediate rate cut in the wake of the US mortgage crisis.

Mr Symond said it was unlikely that house prices were going to go up in the west and southwest and that anyone in dire straits was better off not getting stuck in a hole.

“If you are struggling today you are going to have even bigger problems in a couple of years,” Mr Symond said.

“There is no likelihood that we’re going to get a cut in interest rates for some time, there is a credit crunch on, and unfortunately some people are having to bail out. People with moderate mortgages will be the least impacted but for those with large home loans in the west and southwest it will take longer for the market to go up there than those nearer beaches.“

According to figures from Australian Property Monitors, properties in the west and southwest are failing to sell at auction while the city and Eastern Suburbs are selling at their highest levels since 2002. The inner-west is the best performing region, with an auction clearance rate of 73 per cent, followed closely by the Eastern Suburbs at 72 per cent.

By far the slowest market is the southwest, where only 42 per cent of properties put up for auction are being sold. Between the extremes are the lower North Shore (69 per cent),Canterbury Bankstown (61 per cent), upper North Shore (62 per cent), Northern Beaches (54 per cent), south (53 per cent) and west (52 per cent). The worst performing suburb was Castle Hill, with a clearance rate of 27 per cent.

Reserve Bank Governor Glenn Stevens yesterday said that financial pressure was particularly being felt in western Sydney because benefits from the boom were late arriving.

“I think, on the whole, households are in good shape. That’s not to deny there are pockets where they are [in] genuine distress, there are,” Mr Stevens said.

He said the RBA wouldn’t be cutting interest rates “any time soon”. “I’m not saying that could never happen, but a fair few developments would need to occur before we [lower interest rates],” he said.  

 

opinion

BOOM NOT HELPING BATTLERS

By Justin Vallejo

IN Sydney’s west and southwest where property prices continue to fall ,home owners are selling because they have to, not because they want to. But on the other side of Sydney, on the Harbour and next to beaches, buyers are hungry to inject money from an uneasy share market into blue chip real estate. As the two distinct markets travel in opposite directions, the great divide between east and west is getting wider. The poorer regions have auction clearance rates of 35 to 40 per cent while at the top end of town it’s 75 to 80 per cent. Forced sales are bringing more properties on the market in the outer suburbs, further pushing values down. While Sydney is in the middle of the biggest boom since 2002/03, the difference now is that not everyone will be coming out of it on top.  

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december 22, 2007

property prices fall as trendy east rises

 
 
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By Justin Vallejo

IT'S the map every home owner in Sydney’s west will dread — property values burning red-hot in the east but cooling off on the city’s fringes.

While the affluent water-view suburbs on the east coast have benefitted from gains of more than 25 per cent in the past year, house prices have gone backwards in the city’s south-west.

For Rod Vernon and his family, it could not have come at a worse time — the family have their Bradbury home on the market. Mr Vernon, who has lived in the house since he was a child, said he was confident they would still get their asking price of $385,000 for the home built in the original Sherwood Hills estate.

“With the M4, M5 and M6… living in the suburbs doesn’t have the stigma it had previously. People live where they can afford to buy and where the services are. The west is still the most affordable place for a lot of families… and we’ve left that flannie-wearing westie image behind.”

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Suburbs such as Campbelltown and Camden on the outer south-west have suffered a -0.2 per cent fall in house prices over the past 12 months, according to the latest RP Data-Rismark housing index.

Outer western Sydney, such as Mt Druitt, Penrith and Windsor, recorded just a 0.1 per cent increase while Fairfield-Liverpool (0.3 per cent) and Gosford-Wyong (0.8 per cent) also recorded less than 1 per cent growth over a 12-month period.

By contrast, house prices in Eastern Suburbs such as Vaucluse, Dover Heights and Bondi have risen by 25.7 per cent during the same period. Close behind are the Northern Beaches with increases of 19.4 per cent from Manly to Palm Beach. The upper North Shore (19.4 per cent), the lower North Shore (16.7 per cent) and the inner city (12.2 per cent) recorded strong growth.

Sandwiched in the middle of these two diverging markets is a band of moderate-growth suburbs (below 10 per cent) stretching from St George-Sutherland to Blacktown with the inner west, Canterbury-Bankstown and Central West in-between.

RP Data’s property research director Tim Lawless said the widening gap between inner city and metro coastal markets to the outer suburbs was becoming an increasingly apparent trend.

“In a nutshell, affluent areas are showing strong demand for properties as consumers in these areas are yet to reach their borrowing capacity,’’ Mr Lawless said. “In contrast, affordability problems and mortgage stress is hurting the outer fringe where many of the buyers who would typically buy into these suburbs are at their borrowing limit or beyond their borrowing capacity.”

Mr Lawless said this trend varied in significance from city to city but that the gap was most apparent in the Sydney market where the outer western and south western suburbs suffered under continued pressure. He added that demand for properties on the city’s outer fringes would continue to wane as the number of buyers willing or capable of buying fell.

 
 
 

March 3, 2008

landslide:
house values drop $450 a week as rates rise looms

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By Justin Vallejo

HOMEOWNERS in Sydney’s outer suburbs have been losing up to $450 per week, every week, in property value for the past four years as the truth on mortgage belt misery emerges.

With the Reserve Bank likely to announce yet another interest rate rise tomorrow, a Daily Telegraph investigation reveals hundreds of streets in Sydney’s outer suburbs have houses that have been bought and sold at a loss — in some cases losing more than 40 per cent in value.

Since the peak of the boom in early 2004, Sydney’s southern suburbs have dipped the most in value, with the median price falling $82,750 over the ensuing 15 quarters, according to Australian Property Monitors figures.

Other areas where the Australian dream is souring include Canterbury-Bankstown which has registered $65,000 in losses, Sydney’s southwest $44,500 and Sydney’s west $25,000.

On a per week basis, the changes in median prices to late last year equate to $444 a week losses for the south, $349 for the Canterbury-Bankstown area, $239 for the southwest and $134 for west.

While these changes are based on median movements, a new report by MVS Valuers analysed hundreds of case studies of resold homes to offer more detail on how homeowners are hurting. The MVS Valuers research shows that anyone who bought as long ago as January 2002 and resold recently in Sydney’s west and southwest is likely to have suffered a loss.

Prime Minister Kevin Rudd is today expected to unveil a plan to help families battling housing stress, in a move designed to take the heat out of the predicted Reserve Bank interest rate rise.

Last month, on the day before the central bank increased rates to an 11-year high of 7 per cent, Mr Rudd announced the Government’s $850 million first-home saver accounts scheme. Mr Rudd’s latest announcement comes after research shows 1.1 million low to middle income households are spending more than 30 per cent of their income on housing.

MVS Valuers director Peter Raptis said there was little likelihood of a recovery in housing prices in the short term, instead predicting more possible losses ahead or, at best, nominal growth. The succession of interest rate rises had “spooked” the market, he said.

To present an accurate picture, anomalies such as upgraded homes, sales within families and vacant blocks that have been built on were removed from MVS Valuers analysis. Among some of the worst losses, a home in New Cambridge St, Fairfield West, bought for $780,000 in November 2004 sold in July last year for $415,000, a loss of 46.8 per cent.

At Bond Place, Oxley Park, a unit bought for $455,000 in August 2005 sold last May for $250,000.

At McAndrew Close, Lurnea, a house bought for $420,000 in December 2004, sold last June for $267,000.

On average, houses bought over the past five years and then resold have resulted in losses of $20,912 in Sydney’s west and $20,435 in the southwest.

“You can now get a house, possibly fibro… for under $200,000 if you know where to look,’’ Mr Raptis said.

“It’s amazing how cheap properties are in some places in western Sydney. We’ve seen places go for $160,000 to $180,000. That’s astonishingly cheap when you remember this is Sydney.”

Homes in Sydney’s west and southwest are significantly cheaper than the estimated average price of a home in every other Australian mainland capital, now all more than $400,000.

Aussie Home Loans chief John Symond said last night that Sydney’s mortgage belt was now the nation’s “struggle street” and would pay a heavy price for any further increases in interest rates. Like other property experts, Mr Symond had few words of short-term hope for embattled homeowners in Sydney’s west and southwest with a prediction that their home values would remain “flat, or probably soften” this year

 

property crash - broken dreams in ocean of debt

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By Justin Vallejo

THEY came like prospectors to a gold rush. Young families, budding investors and wily developers flooded Sydney’s west looking for their slice of the city’s property boom.

At its heart was Adelaide St in Oxley Park, a shining example of how to make money from a once-drab suburb with large blocks that could be either lived in or subdivided and exploited. Suddenly, everybody wanted a taste of this new and seemingly abundant gold.

But Adelaide St has turned into a boulevard of broken dreams for anyone looking to make a quick buck — with almost every property bought and sold in the past five years losing tens of thousands of dollars. Since 2003, there have been 13 properties in Adelaide St alone that have sold for well below the price paid, in some cases, just months earlier.

Single mum Michelle Holland came to Adelaide St in March 2005 with her four young children and dreams of home ownership. She bought No. 31 for $370,000, which at $60,000 less than the asking price seemed like a deal of a lifetime. She began to fall behind in the mortgage payments almost immediately and eventually sold the home in August last year for $355,000.

Remarkably, she is still living in the home and paying rent to the new owner. Having borrowed 100 per cent of the purchase price and being slugged mortgage insurance, she has ended up owing $50,000 on a house she lives in but can no longer call her own.

“We were probably only here a year before we started struggling,” Ms Holland said. “We were paying about $650 a week on the mortgage now we’re paying $320 a week in rent.

“We have a better life now. We can actually go out to dinner. The tradeoff is I’ve had to give up the dream of home ownership.”

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Next door at No. 29, Brad and Tracey McCarthy bought a home for $389,000 that only a year earlier had sold to the previous owner for $415,000. A few doors down at No. 11 a developer paid $500,000 with grand plans to turn a 921sq m block into a strip of town houses. It would have made them millions.

Just 14 months later that dream, like so many other dreams in Adelaide St, had turned into a property market nightmare. The developer went bankrupt and the property went on the auction block as a mortgagee in possession sale with a reserve of just $232,000 — less than half what the developer paid for it.

It was eventually sold for $260,000 to Matt and Christie Harnischmacher, who are expecting their first child and plan to spend $150,000 renovating what they hope will be their family home for years to come.

“We couldn’t believe the price we got it for, probably about $40,000 less than what it was actually worth,” Mr Harnischmacher said. “If it wasn’t for the developer going under, I don’t think we would have been able to afford the place.”

Adelaide St has become pockmarked with soured investments. Four villas at No. 84 lost between $70,000 and $105,000 in the space of four years. At No. 109, two units lost $120,000 and $130,000 each between June 2006 and October 2007.

Robert Horne at No. 51 bought the quarter-acre block (1000sq m) four years ago and spent about $600,000 knocking down the existing house and building his dream home. For six weeks it sat on the market for $715,000 attracting little interest until the asking price was dropped by $40,000.

“I reckon it’s probably worth $800,000,” he said. “But people don’t want to pay that kind of money out here anymore.”

 
 
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March 5, 2008

INTEREST RATES PAIN

Double the trouble for struggling families

By Justin Vallejo

THE cost of an average mortgage has more than doubled in the past five years after yesterday’s 12th consecutive interest rate rise. The Reserve Bank lifted its official rate to 7.25 per cent, the highest level in 12 years, increasing average new home loan repayments from $222 to $451 a week since 2002.

And there is no relief in sight for homeowners, with economists tipping another rate rise within months and major banks refusing to rule out further rises beyond the official rate. The latest rise marks the 12th consecutive increase by the Reserve Bank since May 2002, and will add about $51 a month to a $300, 000 mortgage.

Prime Minister Kevin Rudd said it would be a double blow for family budgets still struggling with last month’s increase.

“Two rate rises will hurt working families,” he said. “I’m Prime Minister of the country, I take responsibility for the good news and the bad news, and this is bad news.

“You can sit around and duck and weave [but] we’re responsible for running the country. We’ll therefore take responsibility for dealing with the reality as it presents itself.”

The Reserve Bank also increased rates last month. The increase was the first back-to-back rise since November and December 2003, when the central bank was trying to douse a raging housing boom.

Announcing the decision, Reserve Bank Governor Glenn Stevens said the latest increase was to contain and reduce inflation over the medium term.

“Inflation is likely to remain relatively high in the short term and will probably rise further in year-ended terms, before moderating next year in response to slower growth in demand,” he said.

The bank noted signs that household demand was beginning to slow but that it was uncertain by just how much.

JPMorgan chief economist Stephen Walters said ongoing strength in the domestic economy meant a May rate hike was still on the cards.

“The tone of today’s statement still implies that the RBA retains a very clear bias to tighten policy again,” he said. “Two factors mentioned in today’s statement, however, reduce the risk of the RBA raising the cash rate more than one more time — conditions in financial markets, which the RBA again described as fragile, and the deteriorating outlook for the global economy.”

Mr Rudd warned major banks contemplating increasing their mortgage beyond yesterday’s official increase, saying the Australian Competition & Consumer Commission (ACCC) could be called in.

“We are in continued contact with the ACCC, the competition watchdog, about what other measures may be possible,” he said.

When the Reserve Bank lifted the official cash rate by 25 basis points in February, the Commonwealth and National banks lifted rates on their variable rate home loans by 30 basis points and 29 basis points respectively.

An ANZ spokesman said: “It’s inevitable there’ll be some flow-on to mortgage and other lending rates.”

“And we have the added consideration of the ongoing pressures in wholesale markets, which have raised funding costs [for banks] further,” he said.

Treasurer Wayne Swan said customers would vote with their feet if rates were raised beyond those set by the Reserve Bank.

“Bank customers will treat banks harshly in an environment where we have rising interest rates through the official cash rate if they take the opportunity to pass on in an excessive way other costs that they face,” he said.

Mr Swan was less willing to accept responsibility for the latest rate rise than Mr Rudd, accusing the Liberals of not understanding economics. “Mr Turnbull and the Liberals just don’t understand the inflation problem. They will not even admit the size of the problem,” he said.

 

Trapped in a mortgage they just can’t afford

By Justin Vallejo

THEIRS is a tale of paradise lost: A young family devastated by interest rates, soaring petrol prices and falling equity.

In the space of just five years, Paul and Gillian Taylor (pictured) went from the top of the world into to a financial hole that buried them deeper in a pit of debt that stole their home.

The dream, like so many others across Sydney, started in the halcyon days of the city’s property boom in 2002 and came crashing down yesterday with the 12th consecutive interest rate rise since.

With two children, the couple in 2002 bought a home in Cherrybrook for $420, 000. Two years later they sold the house for $560,000 — a $140,000 profit.

“We bought and sold well and wanted to move closer to the kids’ school at Berowra. If only we had stayed at Cherrybrook,” Mr Taylor said yesterday.

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They initially rented in the area while waiting to find something to buy, but as time dragged on the market started to move and it quickly became clear they could no longer afford a home in Sydney. In 2005 they settled on a place in North Gosford for $370,000.

The market had already begun its downward spiral but they were confident it would hold its value, at worst. Close enough to almost be considered another suburb of Sydney, the family commuted back to Berowra every day for work and school.

For a time, it worked.

“But then petrol prices took a turn,” Mr Taylor said. “I got a new role at work that required more travel and the cost just became too much. It was a mistake moving up there.”

Meanwhile, they had two more children, Flynn, now 4, and Giselle, 2, and saw their mortgage repayments go from $2100 to $2700 a month. Having given up on the Central Coast, they put their home for sale in 2006 for $379, 000.

When it listed, they had hoped just a $9000 increase would secure a relatively quick sale. The opposite happened — not a single offer was made. They put the home back on the market last October for $349,000, the price of the mortgage they took out on the home.

Once they sell, the debt will be reduced and they can start saving again — but there are still no offers.

 

Tale of two generations of homeowners

By Justin Vallejo

BACK in his day as a first home buyer, Graham Ware’s house cost less than his daughter Renae just paid for a car — and $68 a week pay before tax was enough to get by on.

The year was 1971 and the carpenter bought his first home in Fairfield for just $16,500. With two mortgages, $64 a month for 25 years and $26 a month for 15 years, he thought he had it tough until his little girl grew up and started a family of her own.

Renae married, had two kids and like her dad looked to buy her first home. But her year was 2005, the home in Seven Hills cost $360,000, her car loan cost $24,000, and interest rates rose eight times since her payments began — an increase of $350 a month.

“I’ve already gone back to work two days a week and if there is just one more rate rise we are going to have to sit down and think about stopping the kids’ swimming and dancing classes,” she said.

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By comparison, her dad lived in the Fairfield home for 32 years, renovated three times and sold in 2003 for $400,000. It allowed him to buy a 34 ha property 45km outside picturesque Murrurundi, south of Tamworth, and build a new retirement home complete with swimming pool — all debt free.

“Starting out it felt like tough times but I was at least able to pay my bills, set myself up, and do all right raising a family,” he said.  

 

March 5, 2008

real estate franchises go under owing millions

By Justin Vallejo

THREE real estate franchises in The Hills district that owe staff and customers $5 million have gone under amid allegations of fraud and mismanagement.

The Raine & Horne offices in Castle Hill, Dural and West Pennant Hills/Cherrybrook were abruptly closed and administrators called in to sort out the financial mess.

 The situation has forced the franchises’ owners Jason and Jacqui Potten to sell the family home in Dural, worth about $3 million, as their real estate empire crumbles around them.

The NSW Department of Fair Trading has also been called in to review the findings of the current investigation into where the money went. Administrator Quentin Olde told The Daily Telegraph the Pottens, directors of Propestate Pty Ltd, applied for voluntary administration when they could no longer pay staff wages, rent owed to landlords and finance companies calling in loans.

“The cause of the failure of these three offices is largely as a result of the principal illegally moving proceeds out of the trust account,” Mr Olde said.

When a tenant pays rent to a property manager, the money goes into a trust account before being passed on to a property owner. About $1 million is allegedly owed to landlords in The Hills area.

There is another $100,000 owing to about 20 staff members in superannuation, wages, entitlements and annual leave. The bulk of the money, $4 million, is owed to two finance companies that advanced commissions to the directors for sales that were allegedly never made, Mr Olde said.

When a real estate agent sells a property they get a commission, usually about 5 per cent of the sale price, but it isn’t paid until settlement of the contract. Finance companies advance those commissions to agents, which are then paid back once the commission comes through on settlement.

Mr Olde said that the company had falsified documents claiming finance for commissions on sales that had never actually been made. Working on an average commission, $4 million equates to 5 per cent of $80 million worth of property sales.

As well as selling the Pottens property, customers left in the lurch were transferred to other real estate agents in the area.

“It’s obviously pretty dire circumstance and as administrators we didn’t have many other options given the business’s significant liabilities. This is fairly unusual,” Mr Olde said.

The Pottens took over the three franchises between 12 to 18 months ago. When the Castle Hill office opened, Mr Potten said it was an “exciting time” for The Hills property market.

“I linked with Raine & Horne because I wanted to extend my real estate experience with an industry leader,” he said at the time. “The Raine & Horne network is a big family who value all clients and staff.”

A NSW Department of Fair Trading spokesman said they were aware of the issue and had been in communication with the administrator.

 
 
 

April 5, 2008

Reserve Bank Chief's Message: Raise rates and increase taxes

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By Justin Vallejo

THE nation’s most powerful economic figure has urged big banks to ignore the Reserve Bank of Australia’s official interest rate, and suggested taxes could be increased.

For the second time in a fortnight, Reserve Bank Governor Glenn Stevens has gone public to encourage the biggest lenders to go beyond the current official interest rate and slug mortgagees at a higher rate.

 “I can’t tell you at what point rates will come down. I can’t promise they won’t rise. I can’t tell you that, mainly because I don’t know,” Mr Stevens said yesterday.

Almost on cue, the Commonwealth Bank just hours later raised its variable rate loan by 0.12 per cent — increasing the standard variable up to 9.44 per cent and the basic loan up to 8.93 per cent.

With all the major banks having already answered his call by slugging families with inflated rates, Mr Stevens yesterday went one better by suggesting the Rudd Government consider increasing taxes rather than cutting them.

“So you have a structural case to lower taxes and a cyclical case not to, or even to raise taxes if you are really serious,” he said yesterday. “Where to strike the balance is not an easy judgment for any government.”

Mr Stevens also used his address to again invite the banks to ignore his own official interest rate. He said it was “preferable” for major retail banks to raise interest rates themselves rather than have lending dry up and create an unhealthy financial system. The setting for Mr Stevens’ call to lay off the banks could not have been any more luxurious — a $7600 a day suite at the Sheraton on the Park in the city.

Sitting in one of Sydney’s top hotels, he claimed to understand the pain being felt in homes across Australia, particularly in Sydney’s west.

“There’s no doubt there’s a significant number of people feeling pressure,” he said. “There are more of them now than a year ago because of interest rate rises.”

“I am aware of those problems and we are conscious of that and are conscious of the need not to inflict any more pain.”

Mr Stevens once again appeared to fall in behind the banks yesterday, defending their right to raise loans without direction from the Reserve Bank.

“While I know in some ways people feel aggrieved banks are highly profitable, there are other banks around the world that are bearing large losses and because of that, they’re not in a position to make loans.

“If you assess what’s more preferable, the banks we have are far more preferable.”

 

Home is where the heartache is

By Justin Vallejo

IN the mortgage belt of western Sydney, Kellie Forrester has watched home owners all around her fall victim to rising interest rates as they lose their properties. And so it is that the mother of two, living in Kellyville — where the rate of home repossessions is among the highest in the state — sits around the kitchen table with her young family wondering: “What if it happens to us?”

Mrs Forrester and her young family are among the more than 75 per cent of The Daily Telegraph online readers believing RBA governor Glenn Stevens and his colleagues are out of touch with homeowners.

“It is something that you worry about all the time and discuss over dinner because everyone hurts when interest rates go up. And seeing people all around us lose their homes makes you worry even more,” she said. “Hopefully we’re not that proud to let it get to the stage where the bank would come in and repossess the home. We would sell up first, if the repayments became too bad.”

This is where comments from Mr Stevens made yesterday, supporting banks to raise rates even further and calling for tax increases, will hurt home owners like Mrs Forrester the most.

The Reserve Bank’s decision to keep rates on hold this week was a short reprieve for Mrs Forrester, who moved into her new home 16 months ago and has already seen an increase in mortgage repayments of $120 a month. But for just how long, Mrs Forrester asks, will the armistice last — with banks yesterday given another green light to raise rates at any time. One month? Two?

Economics committee member and Lindsay MP David Bradbury said they should hold the meetings in western Sydney to give Reserve Bank officials a wakeup call.

Mrs Forrester and her husband, David Wilbow, spent about $700,000 in November 2005 to build on the block of land in Kellyville. Their monthly repayments now stand at $2580 a month. Since then, they have had another child, six-month-old Rory, to join brother Toby, 3.

Their barren front yard is a symptom to rising interest rates that have struck home owners across Sydney’s mortgage belt. There were 31 writs of possessions issued by the NSW Sheriffs Office for homes in Kellyville in the 2007 financial year, placing the McMansion mecca among the worst suburbs targeted by banks and lenders which launched action to repossess 3948 homes last financial year.

Mrs Forrester hopes their situation will never get to that. To make sure it doesn’t, she has gone back to work four days a week three months after giving birth to Rory.   

 
 
 

June 7, 2008

Eviction threats scare homeowners

LENDERS are using bullying tactics to scare people behind on their mortgage - threatening to throw them out on the street.

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By Justin Vallejo

BANKS and other lenders are using bullying tactics to scare homeowners behind on their mortgage repayments; by threatening to throw them out on the street.

The mortgage finance sector won 4000 writs of possession in the New South Wales Supreme Court last year, giving them the right to repossess properties of customers behind on loan repayments. But after putting those homeowners through the stress of believing they could become homeless, almost 2500 were able to save their houses from being lost at fire sales across Sydney.

The Salvation Army's financial counselling manager Tony Devlin said banks and institutions known as predatory lenders were taking court action too quickly when, in the majority of cases, the threats weren't necessary to get payments up to date.

"It certainly gets a person's attention and can cause great fear of what the consequence might be,'' he said.

"But we'd like to see a lot more compassion exercised when financial institutions are dealing with people in difficulty. To have the Sheriff on the doorstep is quite an intimidating and shaming experience for people.

"We're dealing with a lot of people on the brink of losing their homes and it's an extremely anxious and stressful time. "Some people do even get to the point of having suicidal thoughts. Families break down because of these things.''

An analysis of 4000 writs of possession issued in 2007, obtained under Freedom of Information laws, revealed only 1580 of the writs were executed.

Residents in Sydney's north-west were among the most under siege, with Blacktown having 85 writs of possession issued, but only 50 acted on. In Kellyville there were 20 issued and seven executed, while in Castle Hill there were 21 issued and only two executed.

Australian Bankers Association chief executive David Bell said that while banks write 80 per cent of loans, they were only responsible for 30 per cent of writs of possession issued.

"There is unfortunately a category of lenders out there which are not banks, which are often called predatory lenders who will make loans banks wouldn't touch,'' he said.

The practice has led to proposed amendments to default notices under the Consumer Credit Code that would require rogue lenders to inform customers of their right to fight before lenders can seek a writ of possession in court.

Under the amendments, default notices would make it clear that homeowners have "hardship'' rights under the code, that they can postpone enforcement proceedings, and if a credit provider doesn't agree to a pay back arrangement the decision can be reviewed by a tribunal.

Community councillors and aid workers hope the amendments will result in families saving their homes long before getting dragged through the stressful court process.

"What we are seeing more of are marital breakdowns, domestic violence and a whole range of other crisis,'' The Hills Community Aid and Information Service executive officer Jennifer Tisdell said

 

When shame hits home

You feel helpless, like you’ve lost everything...

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By Justin Vallejo

THEY are losing their home, and at times they’ve lost their sense of self-worth. When it all gets too hard and they feel like depression might take hold, Jason and Paula Smith admit it’s their blue-eyed boy Lucas who makes the difference — not interest rates.

“He’s the only thing that keeps us going,” Mrs Smith says. “I was afraid we would suffer depression from all this. It’s hard. You feel helpless, like you’ve lost everything.

“But how can you not help but cheer up when you look into those eyes and see him smile, see him so happy.”

He can just say “Dada”and point and smile at the “car ’’, but at only 22-months those few words are more powerful than any relief the Reserve Bank could dish out by keeping interest rates on hold.

No short reprieve by RBA Governor Glenn Stevens, or even an unlikely cut in coming months, can turn the tide of loss the Smith family have already fallen into.

Like thousands more residents across Sydney are finding out, it’s too late. Their Blairmount home, north of Campbelltown, has already been placed on the market for just a little more than the $360,000 they paid in 2006.

They’d be happy to break even. When they moved in with Mr Smith’s parents under a 50 per cent split of the $300,000 mortgage, the new father felt he was able to provide what he never had when he was a child moving from town to town in England — a stable family home.

It wasn’t long before interest rates began the upward climb and the Smith family began their downward spiral.

The delivery driver’s hours were cut from six 12-hour days on an award to as little as three days on an individual contract. When it became clear they couldn’t keep up the payments, they tried selling for the first time in September last year but received just one offer below the “breaking even” mark, forcing them to take it off the market.

When Mr Smith’s sister said she could move in and take over their half of the mortgage, the family moved in with Mrs Smith’s parents at Ruse, on the other side of Campbelltown.

“To tell you the truth I felt quite shameful not being able to provide a roof over my family’s head,” he said. “That home was our dream. I wanted to give Lucas something I never had.”

The few mortgage-free months have at least given them some time to save for a bond on a rental home they plan to move into at Warragamba.

When Mr Smith’s sister soon moves interstate with her partner, Mr and Mrs Smith will have to take up their half of the mortgage again until the property is sold. They don’t like to dwell on how long they can keep paying the mortgage before losing their bond and what little savings they have left.

“We have each other, that’s enough,” Mrs Smith said.

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Dad driven to deadly despair by debt

By Justin Vallejo

HE was supposed to take the house keys to the real estate agent that afternoon. Instead Brian Foy took his own life; too ashamed to face his family after being evicted from his Ingleburn home.

Karen and Vicki Foy had no idea their father had fallen behind on the rent. On May 5, the deadline the retired council worker was given to return the keys, the shame became too much.

“We all would have chipped in and helped him out but he didn’t want that, he didn’t want his kids to support him,” Karen Foy said yesterday. “Vicki and my brother are both a bit angry at Dad in some ways for doing it. But I can see if I got into that situation I wouldn’t want to move in with anyone. I would want to be independent.”

Mr Foy, 62, kept from his three children how tough he had been doing it since retiring on a disability pension with an injured shoulder in 2001. The family didn’t find out until recently, but their dad had cashed in his superannuation to pay rent and expenses. Receiving just $460 a fortnight from his pension, his rent increased to $360 a fortnight and he was left with just $50 a week to live on.

Sometime in January the superannuation ran out and he stopped paying all his bills and rent.

“When we found out we were just like, ‘Bloody hell, we had no idea’. He has been depressed before but he wasn’t that bad this year,” Vicki said.

“It was something he could not handle. He knew he was being evicted and this was his way of handling it and not being a burden on us.’   

 
 
 

june 14, 2008

Once well off, now forced onto welfare

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By Justin Vallejo

FAMILIES in new land release “estate suburbs” are the fastest growing group desperate for emergency food packages, clothing and cash handouts.

Community welfare workers are alarmed at the rapid increase in residents from affluent estates such as Kellyville Ridge, Rouse Hill and Bella Vista with hat in hand asking for help.

The Daily Telegraph can reveal where $5.5 million worth in emergency relief funding earmarked for Sydney over the next year is needed most.

Blacktown in the northwest, both the city’s fastest growing area and repossession capital, has been ranked as the hardest hit suburb and will receive $534,000 over the 2008/09 financial year. It is followed by Fairfield ($424,354), Campbelltown ($334,043) Bankstown ($321,269) and Liverpool ($297,412).

Even residents in Mosman have been unable to escape hardship caused by rising interest rates, petrol prices and grocery bills, with aid groups allocated $7707 to help the harbourside battlers.

The Federal Government funding will be distributed to local community welfare groups within weeks.

Jennifer Tisdell, executive officer of The Hills Community Aid and Information Service, said 16 per cent of her clients since the beginning of 2008 had come from new development areas and estates such as Kellyville, Rouse Hill and Bella Vista.

“Last year we would have got just a handful of people coming from those areas and that to me is really a warning bell going off because 16 per cent is a significant number,” she said.

“They’ve got the high mortgages and because there’s not the public transport in the area there could be three or four cars in the family.

“With all their income going to save the mortgage or pay the rent there is very little left over for food, bills and transport.”

The emergency funding is used to provide vouchers for food, transport, medical prescriptions and assistance with rent/accommodation, and part-payment of utility bills. 

 

Another day of evictions in Sydney  

By Justin Vallejo

IT was scribbled on a yellow Post-it note stuck on a collection of photocopied street maps: “1 x Eviction 9.30am. Earlwood. Campsie. Canterbury. Hurlstone Park.”

Like any other weekday in Sydney, Sheriff Belinda Twomey and her team arrived at the Bankstown office that morning to find their grim schedule for the work ahead.

Across town, locksmith Paul Scalpse was readying his tools. This wasn’t his first rodeo, either, so he knew what to expect.

“A few people can be difficult,” he reflected.

In the calm eye of the eviction storm was Steve, a family man with a wife and kids who was now in the crosshairs of a bank calling in a long-overdue mortgage.

The five-bedroom Earlwood home was bought for $770, 000 in 2005, a caricature of suburban Sydney: two stories, red brick, leafy street and handy to a quiet park. At 9.30am, to the minute, the quiet was shattered.

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The three sheriff’s officers banged on the front door and served the eviction notice. In that instant, the family’s world was thrown into uncertainty.

Steve frantically made phone calls hoping for a last-minute reprieve from the bank. His wife threw her bag into the family car and began preparing to leave. Mr Scalpse removed the locks, replaced the mechanisms, put them back and gave the new keys to the bank’s representative.

“It’s a very stressful time for me and the family,” Steve said. “But I did keep pushing the bank back a bit.”

 
 
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September 3, 2008

JOY AND DESPAIr as banks finally act

By Justin Vallejo

TOGETHER, these two families have lived through the best and the worst of the great home ownership dream in Sydney. One is celebrating the first interest rate cut in six years but for the other, it’s too little too late.

Amanda and Daniel McIntyre are among 740,000 first-time home buyers who yesterday tasted the sweet relief of an interest rate cut for the first time. It’s a bitter irony for George Mastros, who was living in a rental home yesterday after his family was evicted by Sheriffs’ officers on the eve of the Reserve Bank’s decision.

We’ve lost everything and now we just have to find a way back onto our feet,”Mr Mastros said. It’s not so much about losing the house but the stress it puts on the family, something has to be done to stop all the families breaking down from these situations.”

Mr Mastros is just one of the 847 home owners to be evicted in the first six months of this year. Another 1242 gained a stay of execution while they held out for the rates to come down. It has been a long wait, with rates rising 12 times since May 2002, when petrol cost just 89.1c a litre. Yesterday, unleaded cost $1.47.

 It’s little wonder, then, that in the wake of the rate cut Mrs McIntyre’s thoughts went to her shopping trolley.

It’s an extra box of nappies that’s for sure. I am excited, it will be excellent to have some extra money in the account each week,” she said.

Although they live less than 50kms from each other, the McIntyre and Mastros families’ experience has been worlds apart.

It was December 2004 when the McIntyres took the plunge with a $375,000 loan through the ANZ Bank for their Riverstone home.

They survived eight rate rises by slashing the entertainment budget, selling one of their two cars to save fuel, skimping on luxuries and work- ing hours and hours of overtime.

We sold the car and my husband was catching the train to work in Penrith but it was taking him three times as long to get there, and costing $120 a month. We could not afford the tickets. He bought a motorcycle and it costs only $8.50 to fill up now so that is saving time and money.”      

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Based on 25-year loan where old rate was 8.90% and new rate is 8.65%. It was money and time that Mr Mastros, his wife and three sons ran out of after moving into what they thought was the great Australian dream home in November 2003.

With a $597,600 loan they purchased their Padstow Heights home for $747,000 at the height of the city’s property boom. But, very quickly, the reality of the dream hit home. The 5.99 per cent interest rate jumped to 7.5 per cent and repayments on one photocopier repair man’s wage became increasingly difficult.

In 2006 he refinanced with the Commonwealth Bank to pay off credit cards he had been using to make the loan repayments, but in September it became too much and the loan repayments began falling behind. In December 2006, the mortgage repayments stopped all together.

They tried to get out but by the time their home went to auction, the property market had dived and no one was interested at the $749,000 sale price — just $2000 more than he paid four years earlier.

I don’t know what’s going to happen from here,” he said.  

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October 24, 2008

new homes surge

Cash and incentives drive NSW housing recovery

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By Justin Vallejo

DEVELOPERS are offering free boats, groceries, petrol and cash rebates as the Federal Government’s $21,000 first-home owners grant sparks a surge in interest from potential buyers.

The giveaways have proven too good to resist, with a 40 per cent increase in the number of people looking for new house and land packages and a tripling of sales for the state’s largest builder.

Developers are taking advantage of Prime Minister Kevin Rudd’s rescue package, fast-tracking housing lots not due to be released until next year.

So far the Government’s initiative to stimulate the housing market by offering increased grants to first-home buyers has passed its week-one test,” Landcom marketing general manager Robert Sullivan said yesterday.

The new grants, $14,000 for existing home buyers and $21,000 for new homes, came while developers were already offering their own rebates, promotions and cash grants of up to $48,000 in an attempt to kick-start sales.

Real Estate Institute of NSW president Steve Martin said the combination was the holy grail the property market needed.

Landcom’s Koala Bay development at Port Stephen’s Tanilba Bay is offering a free $10,000 Quintrex 395 Dart fishing boat with every purchase of land.

The New Rouse Hill development is offering new house and land buyers a $10,000 rebate on settlement and a $48,000 upgrade.

The Pond’s near Rouse Hill is offering a $5000 WISH” grocery and petrol card while Mt Annan’s Garden Gates and Shellharbour’s Woodlands are offering a $5000 rebate for landscaping and $7500 for house design and fittings.

Landcom’s Mr Sullivan said a 40 per cent spike in foot traffic at their NSW sales offices in the past week was highly unusual and directly attributable to the increased grants. Landcom sales tripled last weekend.

In the southwest we had 13 sales at Garden Gates in the weekend just gone, that is a very good result for us,” he said.

Cornish Group’s sales manager Colin Lake said that, since the grants were announced, they had 12 sales on the weekend and another four during the week. We would normally only sell one a week,” he said.

Mr Lake said sales and inquiries were so strong — with a doubling of people visiting the development — that they planned to fast-track 200 lots of land.

The Zalaiskalns family are among homebuyers with extra money to spend as they move from a rental unit into their first home. Thanks to the $14,000 home-buyers grant and two $1000 Family Assistance payments due in December, Carlie Zalaiskalns and her husband Chris can now make an offer on a house at Lisarow on the Central Coast that not long ago was beyond their means.

I love Kevin Santa’ Rudd at the moment,” Mrs Zalaiskalns said.  

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