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We’ve heard a lot about foreclosures in the USA, but not so much here, in Australia. Nonetheless, apparently we’re not doing too well on that front - Port Melbourne was identified as an area where people are experiencing a pretty strong mortgage pain. According to ratings agency Fitch, 4% of households are behind on their payments.

Port Melbourne is not the only spot - the mortgage defaults rate in Oak Park, Mornington, Hoppers Crossing, Melton and Boronia is over 2%. Read the full article in The Age here.

Do not assume that people who default on loans are owner occupiers - there are investors as well that can’t keep servicing their mortgages. This article in Sydney Morning Herald puts this in a totally different light - when an investor defaults on a loan, what happens to the tenants? Do they become homeless? The article speaks about Sydney, but I wonder how many people in Melbourne are being forced to look for another home - and the rental market is tight as it is already.

Economists expect the interest rates to go up in 2010, to be more precise they expect a raise of 1% in 2010 and a raise of another 0.75% in 2011. This would mean that on a mortgage of 300K the increase of monthly repayment will be $190 in 2010 and $340 in 2011. As if people didn’t have a hard enough time already, with all the financial crisis, unemployment and unaffordable housing. Read the full article here.

And this last article is on entirely different topic. Did you know that Aussie homes are the biggest in the world? Australian Bureau of Statistics says that the average floor area of a new Aussie home is now 215 square meters.

Ironically, although the houses are becoming bigger, blocks of land are getting smaller. If you think of it, this is exactly the opposite of what you’d want - you have now more of a depreciating asset and less of an appreciating asset. Go figure Read the full article in Australian Property Investor magazine here.

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To save water

1. Plant native plants in your garden. They are drought-tolerant and won’t consume as much water as non-native ones.

2. Replace the shower heads to water saving ones. You won’t notice the difference in the shower - but you sure will in the bill.

3. If it leaks, fix it. All the taps, inside and outside your house, all the torn drippers, everything. Do not forget to check for leaking toilets..

To save energy

4. Replace your regular light globes with energy-saving ones. Yes, they cost more, but they last longer and consume much less power so it’s worth it.

5. Replace your lighting fittings with the ones that have a ceiling fan. It will help you save on energy in the summer as well as in the winter.

During the hot months circulating air will make the room feel cooler (as much as 8 degrees cooler!), which consequently can reduce your air conditioning bills by up to 40%.

During the cold months you can run the ceiling fan in a reverse order, to push the hot air from near the ceiling (where it normally gets by laws of physics) down towards the floor. This can reduce your heating bills by 10%.

6. Use rebates available to you to insulate your house for free. It will make it cooler in the summer, warmer in the winter and reduce your bills.

7. If your house has external blinds (most houses do), close them in hot days. Less sun will gets in, the temperature will be lower when you come home and you won’t have to run the aircon as much.

8. Finally, the most obvious (yet most commonly forgotten) tip: turn the lights off when you leave the room. Duh, you say… but if I had a coin for every time my partner had forgotten the light on, for the whole day, with nobody in the house, I would be filthy rich by now

Got any tips of your own to cut the cost of home bills?

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What was close, you say? Mortgage stress, that’s what. For the folks who only heard about the mortgage part, but never about the stress part, here the exact definition of a mortgage stress: when people are paying above 30 percent of their income on mortgage repayments, they are under mortgage stress. In basic human language it means that they find it much harder to make the ends meet.

If this article catches you before you made a decision to take a mortgage, good. Because there is something you need to know: Reserve Bank of Australia (RBA) governor Glenn Stevens said that anyone taking on a new mortgage should allow for at least a two percentage-point increase in interest rates. Translation: they are going to increase the rates in the nearest future. To avoid getting into a loan that is too heavy for you, see what your repayments will be if the interest rates raise 2% and then see if that number is still less than 30% of your income.

Of course they won’t raise the interest rates 2% overnight, but it is possible - and even likely - that by the middle of 2010 the rates will rise 1%. I’ve never liked percentages because they can look deceivingly small and insignificant, but if you look at the real numbers - they never lie.

Let’s take the average standard variable mortgage of 270K (according to Australian Bureau of statistics). Let’s assume you’re currently paying 5% interest on that kind of loan over 15 years. Your monthly repayments would be around $2,135. This means that if you are earning anything less than $7116 a month, you’re in a mortgage stress already.

If they raise the interest rates 1%, your monthly repayments will become $2,278. That would mean that to not be in mortgage stress you’ll need to earn over $7593 a month. Do you expect a pay rise of over $5700 in the next 6 months? If you’re not, mortgage stress looks very likely to occur.

You can do this little exercise on any numbers using this helpful calculator here, and my message is loud and clear: please don’t bite more than you can chew, even if the banks let you.

Have you ever experienced a mortgage stress? How did you solve this problem?

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Remember my post about government supporting the environment? Well, it appears that the builders are not so thrilled with the idea of making houses as “green” as possible. Why? Obviously because it makes the houses more expensive and therefore, reduces builder’s profit, plus makes the house harder to sell.

All the new homes in Victoria now must have a 5-stars rating in energy efficiency, and that’s not the highest rating - you could go to 6 or even 7 stars, but it will cost you. For 6 stars you will have to add about an extra 10,000 and for 7 stars - 14,000.

Google in real estate listings market

Not long ago we discussed Google’s invasion of the real estate listings market and what it might bring, and now it looks like the largest companies in that market are not happy. In fact, Domain.com.au and RealEstate.com.au are considering pulling their advertising off Google (that totals in millions of dollars they pay Google for displaying their ads, when people are searching for real estate keywords).

While the giant media companies aren’t happy about the competition, I believe that for us, the consumers, there will be advantages and benefits. I would imagine that prices and possibilities of advertising on Domain.com and RealEstate.com.au will get better, let’s wait and see what happens.

Costs of land are up

Undeveloped land in Australia became more expensive by 7.4 %, a survey by HIA (Housing Industry association) says. It happened in the March 2009 quarter and the median lot price increased to $172,490. I just couldn’t find their definition of “lot” to see exactly how much land it is. It would be a number between 744 square meters (the largest median lot, located in Tasmania) and 607 square meters (the smallest median lot, located in WA).

No more underquoting in real estate pricing

Can you believe that estate agents will finally stop deliberate underquoting? I have trouble imagining that, but we shall see, as now Consumer Affairs of Victoria and ACCC (Australian Competition and Consumer Commission) are making this happen.

Under new laws from January 1 2010 if you’ve done pre-purchase inspections, paid for pre-purchase advice (any pre-purchase costs you’ve incurred), and at the auction it turned out the reserve price was higher than the ad said, you are entitled to get everything you spent back. Also vendors would face fines up to $220,000 for underquoting.

And over to you - what is the most interesting piece of news you’ve read last week?

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That article made me so curious about what’s going on with Australia, how far did Google get here and some very interesting facts surfaced as I looked through the listings in Aussie Google maps / real estate section.

Apparently this is a brand new feature and was only added yesterday, July 6. It was announced by Andrew Foster who wrote on Google’s Official Australian blog “Today we’re adding a feature to Google Maps in Australia that we think will make Maps an even more invaluable resource to Aussies as they go about their busy lives. Increasingly, people are heading online when looking for a new house to rent or buy, and from today, we’re adding the ability to search for properties on Google Maps. We’ve worked with partners across the real estate industry to provide up-to-date listings, which you can search for directly from the Google Maps search box.”

So here is what it looks like (watch the video below):

My next question was - where did the listings come from? Apparently Google have solved the problem of populating their section with ads mostly from myhome.com.au, homehound.com.au and real-estate-australia.com.au (in Victoria). Same as in New Zealand, the most popular websites Realestate.com.au and Domain.com weren’t interested in uploading their ads into Google’s new section.

Of course Google’s interface needs a lot of work to match that of Realestate.com.au, but something tells me they will get it “just right” very quickly. It will be very interesting to see how Domain.com and Realestate.com.au handle the competition - or will it be cooperation?

What do you think of this feature, did you try it? Do you think it will work with or against the big real estate websites?

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So let’s start with my latest reads:

Getting dumped by conveyancers

Did you know your conveyancer can dump you? Yes, I know, it sounds completely unprofessional, and you might expect it from a lover but not from a person you’re hiring for a job.

Nonetheless it happens and here is why: conveyancers charge less than lawyers because they work on assumption that your case will be a very “straight-forward” one and all they’ll have to do is push paperwork. As soon as there are complications that make their life more difficult and you become less profitable as a client, there is a risk of you being dumped, meaning they will return your file and say they can’t (= don’t want to) do anything for you. This is especially dangerous for you if the settlement date is very close because of all the fees you might have to pay for failing to settle.

It doesn’t mean that you have to put up with this dumping and as a customer you have rights, which you can read all about here, in Peter Mericka’s blog.

In-room property auctions - what are they and why should we care

Have you ever seen one of those TV shows where they sell antiques at an auction? Apparently, they sell houses in a similar way. When I think property auction, the image that comes to mind is a bunch of people on a footpath waiting for the show to begin. Well, this is not the only way and if you want to avoid curious neighbors, bad weather or public embarrassment if nobody comes, go for an in-room auction.

Here is what happens: the estate agency books a room in a neutral location and presents about 50 houses at once for people to bid. Although those in-room auctions are quite popular in Queensland and New South Wales, in Victoria they were only recently introduced and right now there is just one real estate group that is holding them.

These in-room auctions looks like an ideal solution for investors, obviously because they are a great time-savers, but on the downside the pace of bidding is faster and the atmospheres can get somewhat intimidating, so I wouldn’t recommend those for a beginner. Read the full article in Herald Sun and find out all the details.

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