Thursday, April 24, 2008

Can sub prime happen here?

Can sub prime happen here? It’s fair to say that a lot of people in Australia don’t have an understanding of why the US market has taken such a severe downward spiral. While there has been much concern that the recent crash in the US market may cause a ripple effect through to the Australian property market, this is unlikely to be the case - according to this article from Australian Property Monitors.

The toll from the sub prime collapse is now estimated to be worth as much as half the value of the Australian economy’s GDP. In other words, the pain endured by the mortgage meltdown in the US may be upwards of $500 billion in credit losses. It is timely to ask what exactly is the US sub-prime crisis and can it happen here?

Early this decade US mortgage rates were about 3%. At the same time the US economy was booming. You don’t need three guesses to work out that property values shot up in line with an explosion of cheap and easy loans. Borrowers that once may have been knocked back because of poor credit history or serviceability (sub prime) now found willing lenders easily. US lenders with advanced risk appetites were falling over themselves to lend money.

Busy US lenders needed funds (liquidity). So they bundled mortgages together into securities (bonds) which are then graded by the ratings agencies so they can be priced and sold. This is called securitisation. The low grade bonds are called junk bonds, but companies called monolines could wrap these bonds in insurance to secure a better rating, effectively taking the junk out of junk bonds.

Super funds, banks and even local councils bought these bonds as investments which offered good cash flow. The original lender appeared to have no incentive to write good loans because they remained at arms length from the ultimate risk. No wonder then in that booming US economy non-bank lenders flushed with funds stopped adequately pricing risk into their loans. The market became so competitive that it appeared as if every man and his dog could successfully apply for a loan at low rates.

There was a sting the tail. Hapless US borrowers took out loans with ramping repayment schedules that would inevitability become too much to handle. For instance borrowers would take adjustable-rate mortgages (or ARMs) which only deferred the pain. Everyone assumed wrongly that property prices only ever go up. So when house prices started dropping, areas like Cleveland, Ohio went into meltdown. Massive corporate write offs reared their ugly head and credit standards began to tighten. Enter the credit crunch.

Personally I don’t think that an Australian version of the US sub prime woes will happen. There are significant differences for related Australian markets. On the surface, property markets look highly vulnerable as more mortgaged households stare down breaking point. Thankfully though, honeymoon rates and ARMs have not penetrated as deeply into our market as they have in the US. Our economy is in much better shape also as it is still expanding, buoyed along by a resources boom. The US economy, on the other hand, is retracting and rates are being slashed to prop up struggling local financial markets. Don’t get me wrong, Australians mortgage holders are exposed to the effects of rising interest rates and a slowing economy, but I would argue much less than our friends across the pacific.  (Written by: Michael McNamara – Australian Property Monitors)

With the market steady, feel free to contact any of our staff at Toop&Toop to assist you with your real estate needs.

Karen Raffen, CEO <>

© Toop Real Estate Group

Thursday, April 17, 2008

PropertyNav... Just follow us

PropertyNav... Just follow us
We’re proud to be regarded as amongst the best in the Real Estate Industry, especially when it comes to innovation. As a lot of you would know, at Toop&Toop we like to keep ahead of the pack. Although we’ve only just recently returned from claiming the Australian Real Estate Institute Innovation award for the third year in a row, we’d like to introduce to you our latest innovation – another world first which will help you in your property search… PropertyNav.

If you’ve ever been in the market for a new home, whether buying or renting, you’d know that locating the property is part of the battle. PropertyNav works for you by providing step by step directions from your home to any of Toop&Toop’s properties in just a few easy steps.

When viewing properties on, you can enter your own address in the “My PropertyNav List” then once you find your dream home you’d like to view it’s a matter of simply clicking on the PropertyNav button for that home, selecting “Navigate” and you’re on your way!

Whether one or multiple properties are selected, you will be provided with a list of directions to assist in finding your way. To help cut down on petrol usage and time, PropertyNav can also generate a ‘best path’ scenario, arranging all the homes into the shortest possible route.

Not only can these step by step directions be printed out, they can also be downloaded into most portable car navigation units including Garmin, Navman and Tomtom - How convenient!

By combining Google Maps technology with point-of-interest file uploading to in-car navigation units, PropertyNav provides buyers and renters with accurate directions from location to destination.

Jump onto today and try it out, we’d love to hear your feedback.

PropertyNav…Just follow us!

Karen Raffen, CEO <>

© Toop Real Estate Group

Friday, April 11, 2008

Toop's win Nationals 3 years in a row!

Well it wasn't the Logies, but the crowd was just as well presented as our TV stars when they converged on the Grand Hyatt in Melbourne last Thursday night.

From around the nation, the Real Estate industries "Cream of the Crop" met for the announcement of the prestigious 2008 Australian Real Estate Industry Awards Ð and what a night it turned out to be!

After South Australia had such a huge year at the national's in 2007, we headed over to Melbourne this year with low expectations knowing that competition would be fiercer than ever. We were right.

Across the whole of Australia agencies are lifting the bar in marketing, service & innovation Ð we're getting rid of the old 'used car' sales persona and presenting a new breed of Real Estate agents who work in line with the vendor and purchaser to achieve the best possible result, through the most efficient and effective means possible.

Toop&Toop are incredibly proud to have been finalists in the 2008 National Awards in four categoriesÉ Large Agency, Innovation, Sales Partner of the year (Peter Veitch) and Achievement (Troy Tyndall).

Peter Veitch, Helen Veitch, Sylvia Toop, Anthony Toop and Troy Tyndall

We're even more excited to be able to let you, our clients, know that for the 3rd year in a row Toop&Toop won the AREI Award for Innovation of the Year!!! Not only is it a huge feat to have held this title for three years running but we are also the only agency in Australia to have ever won this award!

A huge congratulations to the whole team at Toop's for making this happen, to Peter Veitch & Troy Tyndall for achieving finalist status in such highly contested awards, and a special thanks to our phenomenal IT department who manage to turn our sometimes "out there" ideas into reality.

Want to see our winning innovation, well jump onto the web and just .toop it!

Karen Raffen, CEO

© Toop Real Estate Group

Friday, April 04, 2008

Landlord's tax bonanza

Regardless of interest rate rises and changes in the market place, property continues to be a popular form of investment for a number of reasons. Secure investment in land, capital growth and one of the most important points for investorsÉnegative gearing.

For all of you who are investors, or thinking of becoming investors have a read of this recent article from Tim Colebatch of The Age. At Toop&Toop we aren't financial advisers and always recommend you seek advice from your accountant, however we think you'll agree that this is certainly an interesting read.

The popularity of negatively geared rental housing, and its cost to taxpayers, continues
to balloon.

More than a million Australians claimed they lost money on renting out homes in 2005-06, resulting in a collective tax break to them of $3.5 billion, the Australian Taxation Office has revealed. In the same year, only half a million people reported having made money on renting out property.

In most businesses, losing money is frowned on.

In this one, however, it has become the spirit of the game, with landlords writing off their claimed losses against tax, and effectively using the savings to subsidise their property investment.

On preliminary figures, the Tax Office says landlords reported $8.7 billion of rental losses in the year to June 2006. The final figures, on past practice, are likely to be higher than that Ñ
about $9.3 billion.

Seven years earlier, 650,000 landlords reported just $2.5 billion in losses. Since then, the losses have more than trebled, mounting by roughly 20% a year, while the number of landlords claiming them has risen 70%, as negative gearing has become an increasingly fashionable way to cut your
tax bill.

Assuming landlords were facing, on average, a marginal tax rate of 37.5 cents in the dollar, the tax they saved has escalated from about $1 billion seven years ago to $3.5 billion in 2005-06, and probably more like $5 billion a year now given interest rate
rises since.

The Productivity Commission, with tacit support from the Reserve Bank, urged the former Howard government to review the tax breaks for housing, arguing that they favoured investors over first-home buyers.

Former Reserve Bank governor Ian Macfarlane told MPs in 2002 that most investment in housing was "tax-driven", citing negative gearing and the low tax rate on capital gains.

But with a million investors now using the tax break, neither major party is prepared to take it from them. Treasurer Wayne Swan has repeatedly refused to reopen the issue, after the Hawke government dropped negative gearing in 1985 only to reinstate it in 1987, saying the move had driven up rents.

Tim Colebatch, The Age, 19th March 2008

If you are in the market for an investment property, give your local Toop&Toop office
a call.

Anthony Toop, Managing Director

© Toop Real Estate Group