Following five consecutive quarterly falls, national house prices increased marginally in the December quarter, though units fell (-0.5 per cent).

The rise in the national median house prices reflects activity in the Sydney and Melbourne housing markets over the December quarter.

Melbourne led the nation in capital city median house price growth, increasing by +1.1%.

Sydney home prices held their ground over the quarter following a fall of -1.8% over the September quarter.

Sydney has in fact recorded only one quarterly fall in median house prices over the 13 quarters since the height of the GFC in September 2008.

“The small growth in the national median house prices was due to an increase in buyer activity in the bottom end of the market in Sydney and, by contrast, the top end of the market in Melbourne,” said Dr Andrew Wilson, Senior Economist, Australian Property Monitors.

“This result is significant as it shows an end to a recent trend of falling prices over the past year, with the realistic potential for a sustained turn-around in some markets” said Dr Wilson.

“Looking forward, 2012 will provide mixed outcomes for housing markets with some capital cities set to revive while others will remain flat,” said Dr Wilson.

Download the latest APM House Price Report Dec 11

The latest rental vacancy data has been released by the REINSW and shows a slight improvement in conditions in Sydney but a deterioration in other metropolitan centres.

The December rental vacancy rate for the Sydney metropolitan area rose by 0.2 percent to 1.6 percent, the first increase in more than 3 months. While this increase is welcomed history shows us that it is seasonal.

All areas of Sydney recorded increases in the percentage of rental properties available;

- Inner suburbs (0-10km from CBD) rose 0.3 to 1.5%

- Middle Suburbs (10-25km from CBD), rose 0.3 to 2.0%

- Outer Suburbs(more than 25 km from CBD) rose 0.1 to 1.4%

The picture outside Sydney remains grim with Newcastle recording a significant decline in available properties for the second consecutive month.

In December the rental vacancy rate for Newcastle fell by 0.5 percent to 1.1 percent, further compounding the 0.3 percent fall recorded in November.

The overall rental vacancy rate across the Hunter fell by 0.3 percent to 1.1 percent.

In Wollongong the vacancy rate fell by 0.1 percent to 2.2 percent whilst across the entire Illawarra region, the percentage of available properties declined 0.2 percent to 1.6 percent.

Vacancy rates on the Central Coast rose slightly, up 0.1 percent to 1.6 percent.

REINSW President Christian Payne warned the rental situation will only become tighter as we head into 2012.

“The New Year traditionally signals an increase in demand for rental properties across the board.

“The already low levels of available rental properties are likely to be squeezed even further as people return to work and schools and universities resume for the academic year.

“Unfortunately for those seeking rental accommodation, the situation will only become more difficult in the first quarter of 2012″, he said.

Nationally, median weekly asking rents for houses rose by +1.1 per cent in the December quarter with rents for units rising by +1.4 per cent. Canberra experienced the biggest increase of all capital cities for median asking weekly rents for houses, rising +6.4 per cent in the quarter from $470 to $500.

Sydney, Brisbane and Perth also saw modest rises over the quarter, while Adelaide remains the cheapest city to rent a house or unit.

Melbourne continues to be Australia’s most tenant-friendly rental market, with rental prices remaining stable over the quarter. “Increasing competition for properties, particularly from homebuyers unable or unwilling to enter the property market has resulted in rising rental prices over the December quarter for both houses and units,” said Dr Andrew Wilson, Senior Economist, Australian Property Monitors. “After flat results over the previous two quarters, landlords have capitalised on the high competition in the marketplace, and are charging a premium for their properties,” said Dr Wilson. “It is expected that as the housing price cycle bottoms out, and confidence returns we will see increased buyer activity in Sydney, Perth, Brisbane and Canberra through 2012 that will take some pressure off the rental markets in these capitals,” said Dr Wilson.

About Australian Property Monitors (APM) APM is a leading national supplier of property price information to homebuyers and sellers, professional real estate agents, mortgage brokers, valuers, banks and financial markets. APM has been helping our customers make informed decisions about property since 1989. APM monitors residential property activity from a variety of sources including auctions, government and semi-government agencies, real estate advertising, real estate agents and APM’s own researchers. This vast pool of information ensures APM’s databases contain the latest and most detailed house price information available.

1.It’s safe (as houses)

There’s a reason why ‘safe as houses’ is a well-known phrase: it’s true. According to research by AMP, Australian property has increased in value at a rate comparable to that of the share market since 1926 – an average of 11.4% per annum – despite a succession of wars, disasters, recessions and crises. It’s done so without the volatility of the share market too, making it an all-round safer investment.

2.It’s easy to get started

Many Australian property investors didn’t start off intending to make their fortune through property. Instead, they just bought a house to live in. It’s only after seeing the value of their home increase – and realising how much wealth you can generate – that many investors take the leap and start proactively investing. Talk to your broker to work out the smartest way for you to get started.

3.It’s easier to research than stocks and shares

Playing the stock market requires a lot of education. You have to know how the system works and understand the complex world of trading (not least the different kinds of financial instruments used). Once you’ve done this, you’ve then got to get to grips with the companies on the market – which involves trawling the financial press, annual reports, other company releases and so on. Investing in property, meanwhile, is much simpler: at its most basic, you can simply jump online and start looking at properties. Admittedly, there’s more to getting property investing right than just picking a property, but a significant amount of research can be done online (and is usually either free or inexpensive) or by visiting suburbs, open houses and auctions – without having to garner reams of specialist knowledge beforehand.

4.It’s relatively easy to get finance

It may not feel like it when you’re applying for a mortgage, but lenders like property. Home loans are a major part of any bank’s business model, and lenders are more likely to lend on residential property than any other asset class – as evidenced by the fact that they will lend a higher proportion of the value (up to 95%) and at lower interest rates than any other asset class – including commercial property. This makes it a lot easier to borrow to invest in property than in any other asset class.

5.You can use leverage

Borrowing to invest in property also means you get greater access to one of the oldest and most powerful tricks in the financial book: leverage. Lenders will lend up to 95% of the value of the property, whereas they may only lend up to 50 or 60% of the value of a share portfolio. This greater borrowing power allows you to benefit from the capital growth of a larger asset.

6.Different strokes for different folks

Property is a remarkably flexible investment: no matter what your financial aims are, you should be able to find an investment strategy that suits you. Common strategies include: Long-term capital growth Looking to build a retirement nest egg? Long-term increase in value is the most effective way to do this. Positive cash flow Need cash now? Choose properties where rents outweight holding costs. Adding value Spotted a shabby old place with potential? You can renovate, subdivide or develop and create value out of thin air even through asimple paint job– unlike other asset classes.

7.100% control

Once you’ve settled, you directly own the asset and you have complete control over it (assuming you can keep up the mortgage repayments, and within the bounds of planning law). That’s a hugely powerful thing, as it means that you can influence both asset worth (by adding value) and cash flow (eg by raising the rent) directly – something that’s nigh-on impossible to do with shares in a company.

8.You can renovate (cosmetically)

Talking of influencing asset worth, there are a number of strategies you can use to do this, in ascending level of difficulty (and cost). One of the most common is cosmetic renovation – buying a tired property and sprucing up the interior and exterior. This can vary from simply repainting and putting in new carpets, to putting in new kitchens and/or bathrooms and landscaping gardens. It’s a tried and true method of increasing the value of a property – even the outlay of just a few thousand dollars can add twice as much to the right property. The next step up from the cosmetic renovation is the structural renovation: adding bedrooms, bathrooms and so on. This is more complex than a simple cosmetic job – with more scope for things to go wrong and costs to blow out – but can also be significantly more profitable.

9.You can subdivide

Find a property on a big enough block, in an area that’s zoned correctly (or will be soon) and you can apply to the council to chop the block in two – and sell one or both halves for a tidy profit. While not physically difficult, finding the right property can be a challenge – and council approval to subdivide can take months.

10.You can develop

Biggest risk and biggest reward is taking an existing property or vacant block. subdividing and building upon it – usually units or townhouses. The profits can be substantial – if you can get it right. Buying property that can later be developed can equal massive profits. These types of opportunities cannot be found in other asset classes.

11.An investment for every budget

The too-often-made assertion that Australian property is unaffordable is simply untrue. Admittedly, if you’re looking for an investment in the prime suburbs of Sydney or Melbourne, it’s likely that you won’t come away with much change from half a million – even for a two-bedroom unit – but middle-ring suburbs, regional towns and cities, or cheaper capitals (Adelaide and Hobart, for example) can all offer affordable entry points; if you buy smartly, you can also expect equivalent or even better growth than more expensive assets.

12.Price is flexible

If you buy a share, you buy it at the market price at that time: there’s no scope to negotiate. In the property market, it’s exactly the reverse: buying and selling is all about negotiation. You (or someone working for you) can talk down a vendor; equally, a motivated buyer could pay over the odds for the right property. There’s also huge scope to find undervalued properties, particularly deceased estate or mortgagee sales, or sales due to divorce.

13.It improves your financial knowhow

Perhaps a left-field advantage, but investing in property improves your financial know-how. The simple act of saving for a deposit teaches financial discipline; working the numbers in terms of affordability prior to purchase is essential, and once an investment has been acquired, the juggling act of dealing with holding costs, rental income and tax benefits not only requires some monetary dexterity, but also makes you more capable of managing your money – and making the most of every cent.

14.Tax breaks – negative gearing

Speaking of tax benefits, we’d be remiss not to highlight one of the most important benefits for investors: the fact that the tax office allows you to write off investment expenses against tax, thus lowering your income and your tax bill and offsetting any shortfall between rental income and holding costs either partially or in full. This makes investing in property more affordable for the everyday Australian.

15.Tax benefits – depreciation

As well as the negative gearing benefits, property investors also benefit from depreciation – the decline in value of the actual property, fixtures and fittings over several years. Depending on the age of the property and whether it’s been renovated, this can run into thousands of dollars every years – and can be the difference between a property being negatively geared and paying for itself. Investors dismiss depreciation at their peril

16.Tax benefits – CGT

That’s not all, either. Property also benefits from a favourable environment in relation to capital gains tax: if you sell your own home, you don’t pay any tax on the profit; meanwhile, if you sell an investment property that you’ve held for more than 12 months, you only pay capital gains tax on half of the profit. These three tax benefits mean that Australia has a uniquely favourable taxation environment for investing in property – and that’s before you start looking at investing in property via super (more on that later) or targeted schemes like NRAS.

17.You can use your super

Self-managed super funds have been around for some time – however, it’s only in recent years that investing in property via super has emerged as a feasible option due to changes in the law regarding borrowing. It’s incredibly tax-effective: CGT on sale is just 10%, and zero if you’re over 60; a recent ATO ruling also means you’re now allowed to renovate properties held within the fund too. However, you do have to stay within the rules, which are quite complex, so seek advice before going down this route.

18.It’s easier to hold onto if things go wrong

Margin calls are a common feature of shareholdings: essentially, if you’ve borrowed to invest in share, the margin call is when you are asked to deposit more money if the assets in your portfolio fall below a certain amount. However, it’s almost unheard of for a lender to ask you to top up a mortgage if a property falls in value – as long as you can keep up the repayments, you’ll be able to continue holding your property until its value increases again.

19.It’s an asset you can use

Investment or not, your property is still just that – a property. So, should events take a turn which means you have to move into that property, you can (pending rental agreements, of course) whether for the short term or the long term – and, if things change again, you can move back out, leaving your investment intact. That’s a hard thing to do with a share certificate or a bar of gold.

20.Not just investors in the market

An important factor in the robustness of the property market is that fact that it’s not just investors buying and selling property – in fact, investors are the minority. Investors account for around 30% of all mortgages taken out (ABS, July 2011), with the remaining 70% by homeowners – who aren’t necessarily buying with the principal aim of making money from property, but due to any number of reason. This provides the housing market with a base ‘floor’ of activity which, while not protecting it from ups and downs, does limit their impact somewhat.

21.Demand is outstripping supply

Linked to this is that there is an ongoing demand for property – both rental property and property to buy. Australia’s population is growing – perhaps not as quickly as in it was between 2006 and 2009, but still at a solid pace – and housing supply remains tight in many areas (particularly capital cities and areas affected by the resources boom). This provides another floor under the market which makes it less likely that prices will crash. Do your research carefully, though, as some areas of the market do experience oversupply!

22.Limited immunity from fluctuation

The right kind of property can also offer limited immunity against recession. During an economic slowdown, more demand from both buyers and tenants falls into lower markets. This increases values and yields.

23.Other people pay for your investment

In fact, it’s worth noting that, as well as being able to borrow the vast majority of the asset value and the tax benefits, you’re also getting other people – namely tenants – to subsidise your investment through rental payments. You’re getting three different parties helping you make money through capital gain (or cash flow) – making property one of the most affordable investments around.

24.The only thing Australians aren’t taxed on

One especially for the homeowner, the family home is one of the few untaxed assets in the average Australian’s armoury. We get taxed on everything in Australia, but your own principal place of residence is one of the rare things left that the Australian government doesn’t tax you on. Therefore, you can add real value to your own home through a renovation or by redeveloping your property in another way – and every dollar of value you create is yours to keep. The taxman gets none of it.

25.Still keep growing – even when you’re retired

Many investors following a capital growth strategy are putting together a nest egg for their retirement – whether that’s based on selling down and creating a lump sum, partially selling down and living off rental income, or on living off a line of credit. However, what some investors forget is that, even after they retire in, say, 20 years, yield and value will continue to improve – making you worth more each year.

26.It’s a more stable investment

The property market is usually much less volatile than the share market, at least partly due to the effort required in order to purchase a property – in terms of due diligence, legal checks, inspections, length of settlement periods and so on. This means that property is less prone to short-term speculators than paper asset classes. This – along with the relatively long amount of time it takes to liquidate a property asset – also reduces market volatility significantly.

27.Bricks and mortar

Another factor which is comforting to many investors is that they’ve invested in something tangible – something they can ‘look at and touch’. While much this may be a psychological comfort, there’s also a monetary benefit. After all, even if the worst happens, the fabric of the property and the land underneath will still have some tangible value – unlike shares in a company that’s gone under.

28.The government’s got your back

The government of the day – regardless of party – wants house prices to remain robust. Why? Because properties house voters. Case in point: the last time negative gearing was tampered with was in 1987, when the government tried getting rid of it. The results were disastrous: investors stopped investing and rents in Sydney skyrocketed because investors didn’t buy residential property. The decision was quickly reversed negative gearing was reintroduced.

29.Australia’s economy is solid

There may be some short-term wobbles, but Australia’s economic future is well and truly solid. The country’s population is projected to reach at least 30.9m people by 2056 – and these people will all need housing, most likely in the state capitals. The resources boom – responsible for significant property price growth in parts of Western Australia and Queensland in particular – is also expected to continue well into the next few decades, with knock-on effects on supporting industries. This is all set to fuel solid property growth in the coming years – although savvy investors would do well to carry out extensive research into which areas will benefit most.

30.You benefit from other people’s spending

Specifically, government and company investment. Spending on infrastructure like roads and rail and airports can boost values in a suburb or regional town which may have previously had accessibility issues; meanwhile,investment in new premises or projects – universities, hospital factories, resources projects, shopping centres and so on – can provide employment opportunities and increase housing demand. New amenities can also see house prices increase, purely down to an area becoming a nicer place to live. And that all happens without you having to spend a cent.

31.Government incentives

On top of the relatively benign attitude towards homeowners, the tax benefits and the benefits property owners get from investment in infrastructure, the government will also directly give you money to buy certain types of property. The most well-known incentive is the $7,000 First Home Owners Grant, but most states also have some incentive for off-the-plan and new properties. Another investor-focused incentive scheme is the National Rental Affordability Scheme (NRAS), which sees investors paid over $9,000pa to invest in affordable housing.

32.Investors provide housing Financial benefits not enough for you? Well, how about social benefits?

Investing in property provides a supply of rental housing at a range of budget levels – meaning those that either can’t or choose not to buy a property have a choice of places in which to live. Without property investors, providing rental housing would be solely down to the government – you’re housing the nation.

33.You can pass it onto your kids

When thinking long-term for your investment, you don’t just have to think your lifetime – you can also think about your children, too. Depending on the legal structure in which you own your properties, you can pass your investments onto your children either before or after you pass away. Sure, you can do this with shareholdings too, but how many top companies from 30 years ago are still at the top of the ASX 200? Not that many – whereas a well-positioned property should continue to grow over the long term.

34.You don’t have to do the dirty work

If the idea of property hunting, renovating, developing, dealing with tenants or any of the associated tasks that come along with investing in property don’t appeal to you, then you don’t need to do them. The property industry is well-established, with the ability to outsource pretty much every task to an eager – and competent – service provider such as buyers agents, builders, property managers and so on. Sure, it may cost you – but the best providers also confer a competitive advantage which can actually boost your profits.

35.You can do the dirty work

On the other hand, if you do want to get hands-on with the process – whether that’s researching properties, being an active landlord or renovating – then there’s nothing stopping you either. As you’ve got control of your investment, you can be as involved or uninvolved as you wish or as is practical to your lifestyle. However, before plunging in head first, it’s probably wise to make sure you’ve done the necessary research and preparation first.

Want to know more.   Speak to any of the BHR team – we’d love to help you make a smart investment in 2012.   BHR Your Agency for Life

Here are a few facts. Property peaked in May 2007 when it was growing at 4.0 per cent per year, but by early 2008, property value growth had hit zero and was heading south to -1. and -1.5 per cent, where it stayed for a year.

Prices recovered in 2009 to around 3.0 per cent growth, but then dipped later in the year. Then, in the year to November 2011, prices were negative again.

When you look at this story on a graph, it looks like an ‘S’ lying on its side: up and down, not knowing where to go.

Now, in the most recent RP-Data Rismark release from two weeks ago, there’s a sign of recovery. Capital city sales in November showed a gain of 0.1 per cent and regional/non-capital city property sales rose by 0.3 per cent.

The growth might be small, but the good news is that it’s now heading in the right direction.

To bolster this scenario, interest rates were cut in November and December, bringing the official or cash rate to 4.25 per cent, which puts a variable rate mortgage in a comfort zone for most borrowers.

Confusion usually reins in property when too many people treat it as a short term asset. It’s not: property is a steady, 10-year asset that you can also live in and there has not been a decade since the end of World War II where property values have not risen.

With this outlook the worst thing you can do is stay out of property too long.

If you can’t buy what you want, you can buy an investment property and go renting where you want to live. If you’re handy you can buy a place that needs work, and get into the market in that way. Some people go in with a friend, or with a parent.

However, the important rules with property are these: don’t over pay; don’t borrow too much; and buy where there’s schools, hospitals, public transport routes, recreation grounds and parks. These are the things that will support an area’s value.

I would add one last thing. Don’t become dependent on what interest rates will do and make a move into the market if you can comfortable afford the repayments. There are never any guarantees but if you buy on the basics and don’t over pay, property is a good bet… as long as you see it as a 10-year investment.

Andrew Winter, host of Selling Houses Australia on The Lifestyle Channel, offers some “Resolutions” for 2012.

1. I will not place my house on the market unless I seriously want to sell and understand that the price I am finally offered may not be what I hoped for.

2. If I am selling, I will not leave it all to the agent. I resolve to get involved, read the text in advertisements and online, check the pictures, questions all aspects of the marketing campaign and listen to the agent’s advice and give them a chance to explain.

3. I will not underestimate the power of first impressions when selling. I will not leave the toilet seat up, beds will be made, windows will be shining, the whole place will feel clean, and no sign of pets other than pictures of them.

4. As a buyer, I will acknowledge that in reality my requirements will change during my search and I promise to be realistic with my expectations.

5. I promised to do my research and know there’s no such thing as “guaranteed capital growth”.

6. If I see a home I really like I will be prepared to pay market value and not get upset when the sellers, who are normal, sane beings, refuse my mad, crazy and insulting low offer.  I will try to secure the home at the right price, but make sure any low offers are based on facts and market conditions or because the seller needs to sell quick. If I do make an offer under those circumstances, I resolve to act quickly.

Based on around 312,000 sales over the first 11 months of 2011, the market-leading RP Data-Rismark Home Value Index recorded increases in home values across both capital city and regional markets in the month of November following the RBA’s decision to cut interest rates by 0.25 percentage points.

In seasonally-adjusted terms, capital city home values ground-out a modest 0.1 per cent gain (-0.2 per cent raw) in November. House values across Australia’s non-capital city or ‘regional’ markets, which account for about 40 per cent of all homes by number, also rose by 0.3 per cent in seasonally adjusted terms (-0.1 per cent raw).

Rismark’s director, Christopher Joye, commented, ”For Australia’s capital city and regional markets, this was the single best monthly result since December 2010, and augurs well for housing activity during the first quarter of 2012, which we project will rebound solidly. The best proxy for housing demand—the number of new home loans approved for purchasing established properties—has risen robustly every month since its nadir in March.”

The November result has helped improve the Australian housing market’s year-to-date performance. Whereas in October RP Data-Rismark reported that capital city dwelling values had declined by four per cent in the first 10 months of 2011, the November year-to-date index change is now just -3.7 per cent (seasonally-adjusted). In actual raw terms, Australian capital city dwelling values have only declined by -2.8 per cent in the first 11 months of 2011.

Regional markets have performed even better. Over the year to November 2011, regional house values are only off by -2.6 per cent in raw terms (or -2.8 per cent seasonally-adjusted). Including gross rents, the total return realised by investors in capital city property remained positive in 2011 at +1.2 per cent.

According to RP Data’s Senior Research Analyst, Cameron Kusher, there remains significant diversity across capital city housing markets.

“Although home values have fallen across each capital city, Sydney and Canberra have been the most resilient with dwelling values off just -0.5 per cent (s.a.) and -1.6 per cent (s.a.) over the year, respectively” Mr Kusher said.

He continued, “On the other hand, Brisbane and Melbourne home values have recorded total declines of -7.0 per cent (s.a.) and -5.6 per cent (s.a.), respectively.”

“In the month of November, Sydney, Melbourne, Perth and Canberra produced flat-to-positive capital gains following the RBA rate cut. In contrast, home values in Adelaide, Brisbane and Darwin softened further,” Mr Kusher said.

Rismark director, Christopher Joye added, “The November result is consistent with our forecasts that Australia’s housing market will respond much more quickly to the RBA’s November and December cuts than many analysts expect. Over 90 per cent of all Australian home loans are fully variable rate, and lenders have passed on most of the 0.50 percentage points worth of RBA rate cuts during the final two months of the year. Borrowers can now get fixed-rate loans for around 5.9 per cent and discounted variable rate loans as low as 6.14 per cent. As Australia’s most interest rate sensitive sector, the housing market will be one of the biggest beneficiaries of the RBA’s munificence alongside consumer spending. We expect to see house prices rising again in 2012.”

The Prosperity Survey was commissioned by Cuscal, the owner and operator of the rediATM network which serves 110 financial institutions, including credit  unions, building societies and banks. Conducted by Galaxy Research, it measured the views of over 1,500 Australians to understand how they presently view their overall prosperity.

Key findings were:

- Australians have a well-rounded and non-materialistic view of personal prosperity that ranks health and relationships more highly than material or financial gain. Health (22%) and family wellbeing (20%) and love/partnership (16%) are the single most important measures of prosperity, over a desire for home ownership (11%). When asked to rank the top three factors that they use to measure their overall prosperity, half of Australians surveyed mention their health or their family’s wellbeing 52% and 49% respectively).

- Regional Australians view love and partnership as more important than their metropolitan neighbours (43% to 38% respectively)

- When asked to describe their present level of prosperity (including both financial and non-financial measurements), only 46% of respondents considered themselves to be quite, or very prosperous.  One in four respondents said they are struggling with simply not having enough money.

- The outlook for 2012 is more balanced with over one third (35%) of Australians saying that they believe they will be more prosperous, half (52%) saying that they will remain at the same level and one in eight (13%) believing that they will be less prosperous.

- Australians have an inherently sensible approach to their long term goals: most would forgo travel and home renovation (63% and 53% respectively) first; and prioritising their fmily health, children’s education and home ownership, if spending cuts were rquired to make ends meet.

- Home ownership remains  popular long term goal for nearly half (49%) of respondents, suggesting that he Australian dream of owning bricks and mortar is alive and well, although
family happiness and health remains the nation’s number one prosperity goal (69%).

“Many Australians are now reassessing how they view their broader personal wealth with traditional aspirations such as health, happiness and family wellbeing increasingly being prioritised as more important than material or financial gain,” said David Heine, General Manager of Cuscal.

Cath Armstrong, who runs the popular household saving Cheapskates website, agrees with this sentiment. Mrs. Armstrong commented that among her 135,000 members there has been a definite mood swing since the GFC and that this is picking up momentum.

“While people are increasingly looking for more value from financial institutions, utility companies and retailers, they are now realising that a strong and healthy family is just as if not more important than financial wealth,” said Mrs. Armstrong. “Making sure the family is ok is the number one goal right now and if household spending on non-essential items needs to be cut then
so be it.’

“The change of aspiration revealed by the survey, combined with more sensible management of home finances, suggests that while 2011 has been a tough year, Australians are optimistic about the outlook for 2012,” said Mr. Kennedy. “This is particularly evident among rediATM customers who are happier with their financial institutions, who are often more community and service oriented.”

After two days of silence in which the major banks have been resoundly criticised for holding off, ANZ said today that given the economic conditions facing consumers that it should pass on the full cut.

ANZ’s cut will take effect next Friday, December 16, and will see its standard vairable mortgage rate reduced to 7.30 per cent. The reduction will save the typical mortgage holder with a 25-year, $300,000 loan about $49 a month.

The bank’s reduction will now put pressure on rival banks to follow suit, including the two largest lenders, the Commonwealth Bank and Westpac.

It will also put the National Australia Bank in the firing line. Many in the banking industry believe the Melbourne-based NAB has been considering a smaller cut than the RBA because of the funding pressures on its bottom line.

NAB was the only one of the big four banks not to pass on full the last rate of 0.25 percentage points by the Reserve Bank on Melbourne Cup day.

‘Most difficult’

“In the face of the economic and banking crisis in Europe, our decision on the size of the interest rate change has been one of the most difficult we have made in recent times,” said Philip Chronican, ANZ’s Australian divisional chief executive.

”Retail banking margins have been contracting as the cost of funds has progressively risen over the last six months,” he said.

“We know many people in the community are doing it tough at the moment and, on this occasion, we felt that a decision to reduce interest rates by 0.25%pa for home borrowers and for small business was the right one in the circumstances.”

Bank of Queensland and MEBank moved on Tuesday to pass along the full 25 basis-point cut to their customers. A slew of credit unions have also matched the central bank cut, including bankmecu, My Credit Union, Police and Nurses Mutual Banking, Police Credit Union, Northern Beaches Credit Union, ECU Australia and Heritage Bank.

Regular changes

Mr Chronican said the ANZ will now announce changes for retail and small business variable interest rates on the second Friday of each month.

‘‘Bank funding costs are now largely unrelated to movements in the Reserve Bank’s official cash rate,’’ he said.

‘‘This provides a measure of predictability for customers on when rate changes will occur and it provides us with the flexibility to reflect movements in funding costs across the full spectrum of funding sources – not solely in response to the Reserve Banks cash rate.’’

The new small business rates also take effect on December 16. The bank also announced it will offer a special two-year fixed term mortgage at 5.95 per cent.