Puzzle Finance Blog

Get ready for a busy autumn on Melbourne’s property market

 MELBOURNE’S robust property market is expected to pick up where it left off 2014.

And if you’re planning to get in on the action as a seller, now is the time to start preparing for the market’s second main selling season — autumn.

WBP Property Group’s Greville Pabst expects an early rush from mid-February to get campaigns under way before Easter.

“It’s a good time to sell,” Mr Pabst said. “We’ve still got some good weather. You can see the change in the season, particularly in the leafy suburbs like South Yarra and Kew.”


Easter is the biggest event in autumn and falls early this year. But there’s also Anzac Day and school holidays to contend with.

“In my experience, Easter can be the catalyst for the market,” Mr Pabst said.

“I think there’s almost an expectation that there’s going to be strong demand at the opening and before Easter, so people want to get in and capitalise on that.

“When you start looking a bit longer, people are more uncertain, not sure what the market is going to be like.”

Also, March and April are mild months when potential buyers will be more inclined to attend inspections.

Sellers can make the most of their outdoor spaces, too, showcasing the garden before the weather starts to cool
in May.


Making a strong first impression will help to reel in buyers.

So concentrate on cleaning and remove clutter from the house and yard.

Mr Pabst said sellers didn’t need to spend a lot of money, but presentation was paramount in hooking buyers.

“The difference between somebody looking online and seeing the property is they will typically have a look in the car. You don’t want them to slow down and keep driving,” he said.

Mr Pabst recommended simple things such as landscaping, pruning, maybe some new plants and a new coat of paint to boost your home’s street appeal.

LJ Hooker, Narre Warren South, director Metin Aziret said suburban sellers often competed with new estates for buyers and should concentrate on presenting a home that was ready to move into.

“Properties that buyers walk into and don’t need to spend any money and they get the ‘warm and fuzzies’ are the ones that achieve a premium price,” Mr Aziret said.

“We’re talking blue collar workers and middle income workers. These guys will tie themselves up in a mortgage of $2000 to $3000 a month, which doesn’t leave them much to save every month, so if they wanted to change the carpet, which is a $5000 exercise, it takes them a year,” he said.


Selecting the right agent to sell your property was more important than just selecting a brand, Mr Pabst said.

“Investigating their track record, what type of property they have sold, what value properties do they sell, they are the sorts of questions you should ask,” he said.

“What’s their strike rate. How many auctions have they done in the past six months, how many have sold under the hammer.”

Mr Aziret said sellers should select an agent that could tell them what they needed to do to achieve the best price.

Location will largely determine the type of sale a seller should consider, but it’s important to consider that only 30 per cent of properties in Melbourne are auctioned.

“It really is properties within the inner-city areas of Melbourne that attract interest from investors, owner-occupiers and get that competition that really suits an auction,” Mr Pabst said.

“If you’re in an area that is not an investment area, more of an owner-occupier area and therefore is not going to have the same competition from investors and developers, you might be inclined to run a private campaign.”

Mr Pabst recommended a five to six week marketing campaign ahead of an auction and setting a marketing budget.


Mr Aziret said research was essential before selling, both to present a home for sale and to determine how to set a price.

“Do a bit of research in the market of what is selling and visit some properties and get a bit of an idea about what they think of these properties and whether they think they would buy it,” he urged.

“And see what you should and shouldn’t be doing.”

Mr Pabst said seeking independent advice would also help in making important decisions like setting a price, an agent’s commission and a marketing budget.

Posted by Peter Farago - Herald Sun on 31st January, 2015 | Comments | Trackbacks | Permalink

Smart investment or just a money pit ?

One hazard of taking a holiday at this time of year is coming back owning an extra home.

Who hasn't surreptitiously checked out the real estate prices at a favourite holiday destination?

Even in the era of Airbnb where you can find a dream holiday home without a lifetime financial commitment, the lure of a shack by the sea or a hideaway in the hinterland can be irresistible as the following stories show.

Lisa Marquette and Jimmy Wright have similar tales to tell. They were both spending weekends away and were captivated by homes that had just gone on the market.

"We were visiting friends," says Marquette. "The For Sale sign went up." And that was that. "We did all the things you don't do, " she says. "It was emotional."

For Wright, who also has three investment properties and a unit in Sydney's Elizabeth Bay, buying the holiday retreat at Great Mackerel Beach (on Pittwater, just north of Sydney) "was a completely emotive purchase. The For Sale sign went up that weekend and I put an offer in. I emailed Philip [Sangster of broker Mortgage Choice] to tell him on the ferry coming back." Yet neither regrets rushing in.

Marquette says her holiday house – in Walkerville close to Wilsons Promontory – is a "cheap holiday" and they plan to rent it out at other times.

Mike Phillips, a real estate agent at Rye, a popular weekend destination on the Mornington Peninsula, even cites an extreme case of the local plumber who lets out his home and moves into a caravan on the foreshore at Christmas, which is sort of going on holiday while you're on holiday. 

Don't laugh. The $2000 a week earned helps pay for a trip overseas.

Not surprisingly, interest in a weekender or holiday getaway is at its peak in January.

"We tend to see a pick up in people buying holiday homes as an investment property at the beginning and end of each year," says Mortgage Choice's Lauren Booke.              

Going up?

One thing that tends to get pushed to the back of the mind is prudence.

"Once an investor begins to use the words 'it's a good investment' as justification for purchasing a property which has benefits for them, they are setting themselves up for not only disappointment but a greatly improved chance of investing failure," warns leading property adviser Margaret Lomas.

Property prices in coastal areas and the country are notoriously sluggish. They rise only in fits and starts and it can be a long time between drinks from fit to start.

"People go for the capital gains but we don't get what you get in the city. It's like the country – prices here don't move for years," says Phillips.

According to Lomas a good property investment will be in "up-and-coming suburbs with affordable prices which are attracting families who will settle and contribute to the local area economy." So unless you want a holiday home in Sunshine or Blacktown, forget it.

"The place we choose to holiday is attractive because it lacks these characteristics – it's normally in a quiet spot, has little in the way of population growth and often lacks many of those major infrastructure features like arterial roads, hospitals, private schools and community facilities.

"Therefore the capacity of the property in that area to return a good rental yield and grow in the future is limited, and in many cases virtually non-existent," Lomas says.

Holiday apartments in resorts have performed poorly with "costs often blowing out" and frequently changing operators, according to Lomas.

And whether or not you let out your holiday home, you'll be hit by capital gains (if there are any) tax when you sell as well as annual land tax.

But there must be some financial benefits, surely?

A getaway can be cheap – for a property, that is — and during holidays might pull in a fortune.

"Everybody said it would be a money pit and cost a fortune," says Wright who uses Airbnb and almost has to book to stay at his own place.

But in the first full year I made a paper profit of $1500," he says.

Phillips says he has friends who rent their holiday home out over Christmas for $5000 a week. House values in the area start around $300,000.

Provided you don't hog the home at peak holiday periods, which unfortunately is probably when you want to use it, rentals can help pay off the second mortgage.

Besides, it may eventually become your home in retirement, in which case it's the capital gains on the place in the suburbs that you'll be leaving that matters more.

And yes, there are tax breaks if you let the house out. But unless you've got the house or unit on the market for almost the whole year they won't add up to much.

The taxman will apportion how much of the mortgage and other expenses you can claim according to how long it's rented.

And if you're caught staying there a day or two when it's supposed to be on the market, there go any tax breaks.

Two of everything

For many it's the extra costs that can come as a shock.

"They find two lots of rates, insurance and maintenance. They drive down only to mow the lawns and do maintenance so it's not much of a relaxing weekend," Phillips says.

Finding tradesmen, never simple, can be a nightmare.

"It's not easy getting tradesmen because of where it is. You have to meet when it's convenient for them. It's a 40-minute drive for them. And you need a bundle of work rather than just one thing," Lisa says.

And what about another mortgage? This can bring its own problems too.

A place "might only be accessible by boat but main road access is often the criterion for smaller lenders," says Philip Sangster of Mortgage Choice Woolloomooloo.

Also the banks know that values in holiday resort areas don't appreciate much, so will probably want to see a higher degree of equity.

"I've had the local branch say no but I've been able to negotiate a loan from the same bank," Sangster says.

Another trap is insurance.

"Some insurers will not accept short-term holiday rental properties for any new business because they are generally only occupied during traditional holiday seasons and can therefore often be vacant for long periods between tenants.

"There is also a much higher risk of damage to the property where there are a number of different tenants in occupation," according to a QBE spokesperson.

Wright insured with NRMA paying a "slightly more expensive" premium with a clause allowing you to rent.

Anyway there are other options to buying. If you like the house and the area, maybe you could rent it when you want it during the year with a permanent booking.

Or you could time share by buying with friends. But to avoid arguments or changes in circumstances later you'd need to draw up a contract stipulating how much who pays each month, who can buy you out at what value and when you can use it.

Or just invest wisely and use the returns for a decent holiday somewhere.

Think of the hassles you'll save.

In fact there's a world of cheap and interesting destinations out there that many are finding more attractive than staying in the same place year in, year out.

"The rise of low cost airfares and holiday packages over the past decade and the increasing popularity of international destinations for holidays, such as Bali and Thailand, are providing a growing cost-effective leisure time alternative," says Andrew Wilson, senior economist for the Domain Group.

Another downside is the sprawling tentacles of our major cities which are making workaday suburbs of places that were traditionally a place for weekend retreats.

"Popular holiday destinations close to capital cities are increasingly being absorbed by the relentless spread of metropolitan areas," Dr Wilson says.

"This is clearly the case for seaside locations such as the Mornington peninsula and Surf Coast in Melbourne, the central coast in Sydney and the Gold and Sunshine coasts. 

"These are now becoming settled areas for full-time occupiers." They can still come cheap - if you know where to look

Do you return from the beach and immediately check out what's for sale on the property websites? You do? Well you're not the only one dreaming of buying a holiday escape.

And dreaming's the word. If you don't have a spare $500,000 languishing in your bank account, purchasing a getaway can seem impossible. But believe it or not, there are holiday properties on the market for less than $200,000. It's just a matter of scouting them out.

The experts say that to make the most of your investment a second home needs to be within a two-hour drive of your primary residence. The problem for those of us who live in the big cities is that anywhere that close is often prohibitively expensive. So you might need to go a little further afield to pick up a bargain. Maybe to Tassie.

Take this gem in Scamander on Tasmania's beautiful east coast for $189,000. It boasts ocean views and is only a minute's walk to the beach, pub and nearby river.

The bargains aren't restricted to Tassie. There's this three-bedroom house in Victoria's Venus Bay for $195,000 and this two-bedroom house in scenic Port Macquarie for $162,000.

Property investment expert Paul Sonntagsays most bargain buys will need major renovation or at the very least, a good lick of paint.

"These properties are definitely becoming rarer and most of them would need a bit of love just to bring them up to speed," he says.

"It really depends on whether people want to rent the property out to tenants."

There's an obvious cash gap between buying a holiday property for your own personal enjoyment and buying one you hope to lease to holidaymakers.

Weekenders costing less than  $200,000 commonly need bathroom and kitchen renovations plus heating and cooling upgrades if they are to attract any tenants.

Those seeking a bargain may also have to adjust their expectations when it comes to location, says veteran Melbourne real estate agent Greg Hocking.

"You're more likely to find them inland in a little country town than on the beach," he says.

"You sometimes hear about houses in little towns selling for $50,000 and everyone races out there only to find that house is the only one in the town."

Before setting your sights on a cheap holiday haven, it pays to consider just how much you are willing to sacrifice when it comes to location and how much you can afford in renovations, Hocking says.


Things to consider if you're thinking about buying a holiday home:
  • Don't be emotional and make a rash purchase.
  • Proximity to your home is important – if it takes more than two hours to get there, you won't visit that often
  • Treat it as a lifestyle decision, not an investment even if you intend to rent it out.
  • Suss out the area by renting or doing a house swap first.
  • Check the insurance and mortgage conditions.
  • Be prepared to let it out when you might want to use it.

Posted by Money Manager - Fairfax Digital on 28th January, 2015 | Comments | Trackbacks | Permalink

What you can do now to help get back to the beach sooner

The Australia Day weekend is often the end of the summer holiday mindset for many of us. With kids packed up and sent back to school and no more long weekends in the immediate future we tend to resign ourselves to another year of work.

For many of us there still lingers during those first few weeks back the daydream of our lives being a permanent summer holiday. Perhaps while you were lying on a beach somewhere you caught yourself wondering what it would be like if this was what every week looked like.

Perhaps you even allowed yourself the luxury of daydreaming about sipping a mojito as you look forward to yet another week of freedom. 

Of course with the arrival of your December credit card statement and the reminder of how much you spent over the Christmas holidays, that fantasy is often very quickly shattered. That's because the reality is you need income in order to survive and at the moment you don't have nearly enough investments or supplementary income to support anything other than full time work.

But what if the fantasy of work being optional could come true? What if you could retire sooner? What would you need to change or to do today in order to make that happen? It might be different depending on your age and what is happening in your life but here are my tips for what you can do to make the daydream of a permanent summer holiday happen earlier for you, no matter how old you are.

In your twenties

When you're in your twenties you generally aren't thinking of what you're doing in three months never mind fifty years away.

The thing is, if you're smart about it, you won't have to wait 50 years to stop work. If you're smart in your twenties, you can still have a great time and create options for your future self.

Some things you might want to consider are putting an extra $20 per week into super. This might seem like an insignificant amount now but the power of compound interest can turn this $20 per week into over $200,000 when you retire. That's a tidy sum of money.

Other things to watch out for are credit card debt and car loans derailing you early and creating a whole lot of debt for assets that aren't going to increase in value.

Instead, spend your hard earned cash either purchasing assets that are going to increase in value or perhaps if you're entrepreneurial into a business idea instead.

If you don't have enough cash to do this, consider talking to friends and doing it together.

In your thirties and forties

These decades are where people's life choices can really affect how soon that permanent vacation happens. So if you've chosen to have a family, again even salary sacrificing a small amount into superannuation can make a huge difference down the track.

Or if you're not comfortable with traditional superannuation funds and you have the time and inclination, why not think about self-managed superannuation – particularly now there is the ability to borrow to purchase property.

Again, if you've bought your first home and you have some equity available make sure you use it wisely.

Consider using it as a deposit to purchase an investment property or perhaps some other type of asset that will increase in value.

Or perhaps use that equity as capital to start a business. Now is the time when you don't have quite as long to recover from poor money decisions so think carefully before you use the equity in your home or credit cards to fund overseas holidays or assets that aren't going to appreciate in value.

And if you're desperate to send your child to a private school but the one that you want to send them to will take up  a third of your after-tax salary perhaps do some research to see if there are cheaper options that will give you just as much value.

In your fifties and sixties

Sure you might think you have run out of time to retire early but there are still smart decisions you can make today to ensure you retire sooner or with more cash.

So if you haven't talked to a financial planner, accountant or even a free advisor with your super fund to find out what it's doing, go and make an appointment to do that now so you know what you are facing.

If you haven't looked into Transition to Retirement schemes to see if they're right for you then you should talk to your advisor at the appointment you're going to make.

If you still have a mortgage on your home and you're thinking you can't salary sacrifice anything extra into superannuation until you pay that off then consider only paying the minimum repayment and then salary sacrifice the maximum into super instead.

With interest rates on your mortgage being incredibly low and tax rates lower in your fund this might mean you have more overall cash at retirement. And of course once you retire, you can grab the extra cash out of your super fund in a lump sum and pay your home loan off in one go.

Too many people are looking for a lottery ticket, a magic pill or a fairy godmother to create the fantasy life for them. Instead, why not become your own fairy godmother and do something this year to help you reserve your place on that beach all year round.

Posted by Melissa Browne - Money Manager (Fairfax) on 28th January, 2015 | Comments | Trackbacks | Permalink

Property investment is all about choices

Not everyone that purchases an investment property makes money.

The success  or failure of investing in property is all about making the right choices. 

The first decision that must be made is whether it is a lifestyle property investment or a financial property investment. 

A lifestyle property investment is purchased more for lifestyle and emotional reasons than to just make money.

An example is someone who would like to either have a tree or sea change when they retire. In this situation it can make sense for someone to buy an investment property in an area that they would like to retire to, have tenants help pay off loans needed to make the purchase, and then look to shifting into the property once retired.

When a property is purchased to deliver the best financial return possible a choice must be made between commercial or residential property.

Commercial properties tend to have a higher rental return than residential property, a commercial tenant pays all outgoings including rates whereas a residential tenant only pays the rent, and the rental period for a commercial property is often at least three years while a residential rental period tends to be only 12 months.

Where a residential property investment is often superior  is in capital appreciation.

Because land is a greater component of a residential property  than a commercial property, and because the main driving factor for increasing property values is the increase in the value of land, residential properties often increase in value more than commercial properties.

If the decision is made to invest in residential property the next  choice is whether to buy an existing property or one from a developer off the plan. It has been my experience that the capital gain made by investors buying established properties is greater than buying a yet to be completed property from a developer.

There are often so many layers of cost included in yet-to-be-constructed properties, such as marketing and selling costs, that investors pay more than the true market value. If  a property is purchased from a developer a comparison of its cost should be made with properties offered for sale in the same area. It can also be wise to contact a quantity surveyor and ask for their opinion on the value of the new property.

One advantage of buying from a developer is that the investor will maximise their rental tax deductions. This is because in addition to claiming interest on a loan used to purchase it, and other costs such as agent's fees and rates, a deduction is also allowed for the write-off of the value of fixtures and fittings in the property and the cost of the building itself.

Properties built after 1985, used to produce rental income, receive a tax deduction for 2.5 per cent of the construction cost of the building. The advantage of buying a property from a developer is that they often provide a schedule that details and maximises the deduction for the building and fixtures and fittings write-off.

Once the property has been chosen a decision must be made on the type of loan to use. As a general rule it is best to purchase an investment property using an interest only loan rather than a principal and interest loan. This is because only paying interest on the property investment loan means an investor can use any excess cash to either pay off private loans or make other investments.

The final choice is how long it will be retained. While a person is working and accumulating their wealth a negatively geared residential property makes a lot of sense. The problem is once they retire the low rental income produced by a residential property is a major disadvantage.

A decision should therefore be made as a person nears retirement to sell the rental property, minimise the capital gains tax payable as much as possible, and use the proceeds to provide the highest most tax-effective retirement income.

Max Newnham is the founder of www.smsfsurvivalcentre.com.au

Read more: http://www.smh.com.au/money/investing/property-investment-is-all-about-choices-20150122-12vv5q.html#ixzz3QEsjnpdE

Posted by Max Newnham - The Age on 28th January, 2015 | Comments | Trackbacks | Permalink

Living in the best of both worlds

For people at the lucky end of the scale, there's a new twist to the lifestyle choice of sea-change or tree-change. It's no longer about quitting the city for good, or having a weekender to visit on the odd occasion. The new ideal is to have both — a city dwelling and a blissful retreat — and to live more-or-less equally in two not-too-distant places.

Agents in coastal and country areas of Victoria say the dual life is a growing trend, often financed by selling the big suburban family home. A smaller, inner-city base is used for work commitments, social engagements, family contact, special events and appointments; and the getaway, usually a bigger property in a more affordable location, offers space, fresh air and serenity.

Good security, low maintenance and city parking are key requirements.

The main drivers of the trend are:
  • affluence, some gained from profits made on the Melbourne property market, and some resulting from access to employee superannuation made compulsory in 1992;
  • technology, allowing people to work remotely;
  • discontent with rising levels of stress, traffic and over-crowding in the city;
  • new roads reducing travel time to the Great Ocean Road, the Mornington Peninsula and central Victoria;
  • the spread of Melbourne's vibrant cafe culture out of town;
  • and the meteoric rise of inner-city apartment buildings that make buying a lock-up-and-leave place easier than a generation ago.
Lorne's Smyth Real Estate agent Grant Powell says: "The landscape [of property purchase] has changed over the past 15 years down the coast. It used to be they sold up in Melbourne and moved to the coast; now they do it but retain a bolthole in Melbourne. It comes up regularly. Many people now can afford two places when they sell [the family home]."

Powell says that as well as retiring baby boomers and semi-retirees, professional couples and young families take advantage of technology, flexible work practices and being self-employed to choose their workplace.

On the Mornington Peninsula, the growth of the cafe culture along bustling bayside shopping strips means people can have the best in both of their worlds. Ilze Moran, of RT Edgar Portsea, says: "It's definitely the case that people who can run a business, or their life, on the phone or computer will rent here then buy, to try to spend more time here, say from Thursday to Tuesday each week rather than just the weekend.

"For some people, if they have a house in Melbourne, they're happy to have a lock-up-and-leave here, or if they have an apartment there, they want the house here. It depends on their situation. People who downsize in town tend to have their kids and grandkids come and stay here more often."

Daylesford stalwart Glenda Rozen, of hockingstuart, says the spa country, a sub-90-minute trip up the Western Freeway, attracts many dual-dwellers, from company directors to young families seeking the space they can't afford in the suburbs.

"Twenty years ago they'd just buy the weekender," Rozen says. "Now it's changed. Lots of people have their main residence here and a place in Melbourne, and some commute. Here, their priority is seclusion and peace and quiet."

Lucas Real Estate selling agent Camilla Milic says Docklands apartments make the perfect city abode for people whose main house is out of town. "Lots of our clients do that. It's definitely popular," she says.

A divided life

City base
Apartment: Docklands, CBD, Southbank, St Kilda Road, South Yarra-Toorak, Port Melbourne 
Cottage or terrace house: Fitzroy, Richmond, Hawthorn, Prahran, St Kilda East, South Melbourne 
Unit or townhouse: Elwood, Malvern, Camberwell, Kew, Clifton Hill. 

Southwest: Queenscliff, Barwon Heads, Anglesea, Aireys Inlet, Lorne 
South-east: Mount Martha, Blairgowrie, Portsea, Flinders, Phillip Island 
Gippsland: Cape Paterson, Inverloch 
Spa country: Kyneton, Castlemaine, Daylesford, Hepburn Springs, Trentham, Creswick 
High country: Warburton, Eildon. 

The pros: A change of scenery, peace and quiet, no need to book holiday accommodation, two sets of friends, a break to routine, easy access to city needs (medical, business and work appointments, dining out, sporting, cultural and other special events).

The cons: Cost of running two properties (rates, utilities, insurance, appliances, furniture, household items), garden maintenance, juggling appointments, security, driving back and forth, possibly poor internet service out of town, deciding on shopping/fridge contents, having pantry items in both places, needing two sets of clothes.

Posted by Jacqui Hammerton - The Age Domain on 24th January, 2015 | Comments | Trackbacks | Permalink

More than one way to strike it rich

The path to property investment can seem endless and almost impossible. But there are two wildly different routes investors can take to get there sooner.

Nathan Birch and David Thompson are both 29 and have achieved their dream of making money from owning investment property. However, both men have taken markedlydifferent savings approaches to get there.

One has saved hard and fast, while the other has opted to spend his meagre savings and dive straight in.

Living frugally and working two jobs helped Birch purchase his first investment property at 18.

"I was the epitome of the miser," he says.                

"I would collect coupons to eat. But I was smart about it and turned it into a game of how much I could save." Birch's extreme savings plan started at 13 when he realised he didn't want to work half his life away.

"I came from a blue-collar family and everyone worked hard for their money," he says.

"When I was 13 I realised I wanted to be like rich people. Between 18 and 23, I worked two full-time jobs and really pushed myself. I sacrificed my youth, but now I'm building my mansion on the better part of half an acre."

By day the Sydneysider worked day jobs in real estate and advertising, while pulling beers at a pub in the evenings. His goal was to earn $50,000 rental income by the time he turned 30. Although Birch is yet to reach that milestone, he now earns $400,000 a year thanks to his 160 investment properties.

Admittedly he has $10 million of debt, but says the total value of his properties is $30 million and before expenses his rental income is $2 million.

"The properties I bought a decade ago for $150,000 are now worth $400,000," Birch says.

After ditching his day job at 24, Birch says he threw away his resume. But he found all his mates were still working, so with little company and not much to do, he began to suffer anxiety.

Making YouTube videos tutoring others on property investment proved to be an effective outlet and it morphed into leading property investment group B Invested.

Plan B

By contrast, Thompson skipped the hardcore savings plan and jumped headfirst into property investment two years ago.

The Adelaide building designer realised he did not have enough cash to go it alone, so he joined a group of five investors who pooled their money to buy a property.

"Everyone was different, I put in $20,000 and a couple put in $100,000," he says.  "There was no way I could afford to do it on my own."

The group subdivided the land and built four houses before selling. Thompson made a 25 per cent return on investment and it spurred him on to buy and sell a second investment property.

"Working in the industry, I knew the calculated risks," he says.

"Even if I lost money, I was still young enough to get back on my feet. You can wait and wait, but unless you give it a crack you're never going to know."

Thompson, who owns property design consultancy InProperty Design, is now on the lookout for another joint venture partner. Even though there are risks involved in merging funds with someone else, Thompson says it's a speedier route to capital gain.

"Of course there are risks, but they are worth taking in my opinion," he says.

"There's no way I would have earned that capital by myself in that amount of time, so it was like fast-tracking."

There are pros and cons to both approaches, says Miriam Sandkuhler, property investment author and founder of buyer's advocacy group Property Mavens.

"It really comes down to individual circumstances, such as income and cashflow management," she says.

"People have to be prudent and do their homework."

One thing's for sure, both Birch and Thompson have got a leg-up on investors twice their age. Sandkuhler says the earlier property investment is made, the greater the reward.

"Definitely start as soon as possible," she says.

"Save as much as you can, which means you have to make sacrifices to get started out.

"The earlier you start, the greater opportunity for compound growth and ability to create wealth over time."

However, she warns eager investors lulled into a sense of security by low interest rates to factor in potential rate rises of up to 3 per cent. Save or spend?

The cash-splasher 

  • Faster investment equals longer compound growth 
  • Avoid years of tight-fisted saving 

  • Likely to invest with lower deposit 
  • Greater risk for mortgage stress 

The penny-pincher 

  • Amass a healthy deposit 
  • Be more prepared for interest rate hikes and unexpected expenses

  • Slower to invest means less time to create wealth
  • Sacrifice spending to save hard

Read more: http://www.theage.com.au/money/investing/more-than-one-way-to-strike-it-rich-20150108-12k8ba.html#ixzz3PbMORFgq

Posted by Kate Jones - The Age on 23rd January, 2015 | Comments | Trackbacks | Permalink

Summer market buzzing with sea changers and sun-chasers looking for a beachside pad

As the mercury rises, the eyes of the real estate market shifts from the city to the big, blue horizon.

Summer is when oceanside properties shine and the appeal of a pad that is nestled just metres from the sand may be not just for the holidays, but a permanent proposition.

Some agents in popular coastal villages are reporting that more sea changers have been buzzing around the market - like seagulls on a hot chip - looking to make the move from the big smoke to the ocean front.

Just as the baby boomers - who are often downsizers - have been active in the city apartment market, so too are they responsible for the keen interest around properties at some of Victoria's most picture postcard perfect beaches.

Overall, the mood among coastal agents and their vendors is bouyant and not solely because the skin-prickling sunshine, cold drinks and weekend barbecues at this time of year have everyone in good spirits.

They are prepping for the upcoming Australia Day weekend, which is the traditional sweet spot for selling beach property under the hammer.

Great Ocean Road Properties director Ian Lawless feels confident about the Anglesea real estate market after improvements to prices and turnover over the past year. 

Anglesea is a long-time popular holiday spot for families but increasingly, is blooming into a lifestyle destination for seachangers.

Unlike Ocean Grove and Torquay, local agents say Anglesea retains its holiday-town feel as it is bounded by a national park, with limited new land for release.

Mr Lawless said the number of $1 million-plus sales had soared from four in 2013 to 13 in 2014, with his office completing more off-market transactions than previous years. 

"Anglesea is a discretionary market so a lot of people come into the market when they feel confident," Mr Lawless said. 

Flinders on the southern tip of the Mornington Peninsula may not have the posh status of the millionaires' playgrounds of Portsea or Sorrento, but it still lures the rich and famous.

The coastal town has been home to identities such as businessman John Elliott and singer John Farnham, both of whom previously owned properties on the swish Spindrift Avenue.

Local agents, including RT Edgar director Michael Phoenix, say although the selling season has just started, they have seen more buyers coming back into Flinders, which could translate into prices growth.

"We are seeing more buyers aged in their late 30s and 40s than in previous years," he said. 

"More people are looking to live there permanently because our part of the peninsula is a lot more accessible to Melbourne now the Peninsula Link has opened."  

On the south-west coast, Lorne's permanent population has declined over the past 20 years, but the property market in and around the resort village, including Aireys Inlet, Fairhaven, Anglesea and Point Roadknight, is buoyed by Melbourne-based buyers acquiring weekender properties so they can divide their time between the sea and the city.

Hodges agent Simone Chin expects stock to come on to the market in Lorne even post-summer, when some families prefer to list to so they can have one last holiday at a beloved beach house.

Given Lorne's long history as a coastal getaway, family ties and an emotional connection to the area are a powerful lure for prospective buyers.

"People who have childhood memories of Lorne or parents who have been coming to Lorne for quite a long are coming back," Ms Chin said.

Ms Chin said ocean views are naturally always sought-after, but the quieter forest areas outside the township, near the Great Otway National Park, with waterfalls nature walks, and are growing in cachet and demand.

Tip for choosing a sun drenched destination
  • Victoria's coastal hamlets have distinctive characteristics: Inverloch is renowned for fishing and boating, Sorrento has city-quality boutique shopping and Flinders is a glamour postcode for sun-chasing buyers with deep pockets who want to avoid some of Portsea and Sorrento's bustle and commercialism.
  • You will pay a premium for ocean glimpses. Determine if this is a priority that is within your budget. 
  • The downsizer and baby boomer market may want to consider property that is within walking distance to village shops, for ease and convenience. Look for real estate that allows you to make the most of the sea change by moseying to the corner store, and leaving the car at home.
  • Some families will celebrate one last holiday at their beach home before parting with it, so look to post-summer listings if you are still in the market.

Posted by Christina Zhou & Emily Power - Domain (The Age) on 17th January, 2015 | Comments | Trackbacks | Permalink

Experts provide a window into Melbourne’s property market future

 WHAT does the new year have in store for Melbourne property buyers?

We asked CoreLogic RP Data Victorian market expert Robert Larocca and WBP Property Group valuations manager Adrian Graham to look into their crystal balls and throw some light on what different buyers can expect from 2015.

First-home buyers

RL: It will continue to be difficult for first-home buyers to break into the market. It is going to be outer suburbs or high-rise accommodation in the inner city for them. There doesn’t appear to be any change in financial assistance or reduced taxation on the horizon for them.

AG: The first-home market will still be very competitive and that competition will continue to make it difficult for first-home buyers looking to buy at auction in Melbourne.


RL: Investors have been playing a larger role over the past year or so and I see no reason why that would change. The biggest question for local and international investors is whether Melbourne will remain an attractive place to invest their money. I think it will. That’s why last year’s strong level of investment activity will continue this year.

AG: More investors will come in to the market due to low interest rates, SMSF (self-managed super funds) opportunities and the potential for capital growth. Inner suburbs will be the main focus due to higher capital growth opportunities and more investors will buy apartments due to affordability.

Unit buyers

RL: High-rise apartments in the inner city are unlikely to see much capital growth in the short-term due to the high level of supply. Those looking for better capital gains in the short-term should focus on areas with strong demand for property and reasonable underlying land values. Location matters as much for units and apartments as it does for houses.

AG: There will be strong competition for older established units and apartments within the 10km of the CBD and therefore good value growth. Price growth and sales in modern and off-the-plan units will be patchy because of the high amount of supply coming through.

House buyers

RL: Detached housing in the inner-city saw strong growth last year but the market will probably be a bit flatter this year. We probably won’t see the same rate of price growth. The middle suburbs will provide those priced out of the inner suburbs the opportunity to buy established housing on reasonable blocks. New growth areas are not where you would buy for capital growth.

AG: The housing segment will be the market’s strongest. We are predicting steady growth of 7 per cent to 9 per cent within 10km of the CBD. Growth will be driven by low interest rates, continuing strong demand and relatively low stock levels of good housing.

Inner suburbs buyers

RL: Increasing growth and population in inner Melbourne is a certainty. There will be more apartments coming up while demand remains strong from local and international investors. But a lot of factors will play into that, including the exchange rate, price decisions by developers and approval decisions by government.

AG: Houses in inner Melbourne, particularly for period homes close to the villages, will be in high demand. We predict houses under $2 million within 10km of the CBD will be the strongest sector of the market. They will have the most demand and highest price growth.

Outer suburbs buyers

RL: The state of the economy will impact this segment of the market. It will be hurt if  unemployment continues to rise but helped if interest rates remain at the current low level.

AG: We expect 0-4 per cent price growth for homes under $500,000 in the mortgage belt, 20km-plus out from the CBD. These areas can be impacted by significant supply in land and new housing. Small and middle-sized developers add a lot of supply in these areas that appeals to investors. That can apply downward pressure on values in some of these areas.

Posted by Neelima Choahan - Herald Sun on 17th January, 2015 | Comments | Trackbacks | Permalink

Picking a real estate agent for your home: How to get the right person to sell your property

 BEFORE you whack a ‘For Sale’ sign up on your front lawn, here’s how to find the right seller for your property.

Selling your home is stressful, not least because it’s often just one part of a jigsaw of challenging events.

Your choice of real estate agent is a crucial piece of the jigsaw to get right. This person is going to be right in the thick of your affairs for a while, and you want it to be a good and fruitful relationship. So, where do you start looking? Inside Out has some great tips on how to do it. 

‘For Sale’ signs

Once you’ve decided to sell, you start to see these signs everywhere. They represent two things — information and threats. They tell you who has dominance in the market and who has similar listings to yours.

“There is no doubt in my mind that if there were five boards up in the street for the same agent, you’d get them in to look at your house,” says Mia Fredrix, an agent based in Sydney’s Drummoyne.

Open inspections

Another way to suss out local agents is to attend open houses, even if you’re not in the market to buy. Watch how agents conduct themselves. Do you like the way you’re greeted? Does the agent follow you around, so you can’t get a moment alone? Are you ignored?

When you’re interviewing agents with an auction in mind, ask who the auctioneer will be and see them in action.


Ask people you know in your area who have sold recently who they used and whether they’d use them again. Return business is the best reference of all.

Letterbox drops

Local knowledge used to be king, but the landscape has changed with the advent of the internet. “Before the internet, 80—90 per cent of people we dealt with, buyers and sellers, walked in the door or phoned us,” said Ms Fredrix.

“Now, 80—90 per cent of people don’t come through the door. They look you up online, and know all about you before they make contact.”         

The interview process

It’s time to get agents in to give you a market appraisal of your property and discuss how they would sell it. Invite as many as you can make time for.

What are you looking for in an agent? One key thing is rapport. Do you get on? Do you feel you can trust them? This is followed closely by reputation and track record. Experience is priceless.

If you have seen them at open inspections, you’ll have already gauged a little bit about how they operate.

Some agents go after buyers with gusto, while others take a ‘softly softly’ approach. Pick an agent who will deal with buyers in a manner you’re comfortable with.

Consider the type of sale that’s been suggested and the proposed marketing campaign. Are you happy with these choices? As for commission, there’s not a great deal of variation between agents. In Sydney, commissions might range from 1.5 to 2.2 per cent. On the other side of the continent, “2.5 per cent is pretty standard,” says agent Jeff Hasluck, who works the southern suburbs of Perth.

If in any doubt about an agent, take the advice of Amanda Lynch, CEO of the Real Estate Institute Of Australia. “If you don’t feel an agent is taking your individual circumstances into account, then try another agent. There is a lot of competition in the sector and a good agent will value you as a client.”         

10 questions to ask a real estate agent.

1. How did you arrive at this appraisal?

2. Will you be working on the property?

3. How many other properties are you currently handling?

4. What price will you be quoting to prospective buyers?

5. May I see references from past clients?

6. Do you have people in your database looking for a property like this?

7. How long does it normally take you to sell a home similar to mine?

8. How long have you worked as an agent? How long in this area?

9. I don’t want to go to auction and/or hold open inspections. Is sale by private treaty/inspections by appointment possible?

10. How often will I get progress reports?

Things an agent should do

• Record in writing all payable fees, commissions and marketing costs

• Record in writing your length of contract and the expected sale price range (which should match the price quoted to interested buyers)

• Offer feedback on inspection numbers, contracts issued and buyer feedback

• Tell you of all offers received

• Act in your best interest at all times

• Be aware of the sensitive nature of your confidential information

• Be a member of a professional body, such as the Real Estate Institute

Posted by News Limited Network on 17th January, 2015 | Comments | Trackbacks | Permalink

Lose weight, stop smoking, invest in yourself

Welcome back to a brand new year. If you're like most Australians, you'll be using the change of calendar to review your life and think about what changes you should make. Drink less. Exercise more. Eat better. Change jobs.

They're all worthy goals, of course, but what about your finances? If that sounds less exciting than dropping a size or getting that dream job, you're right, until you consider just what revamping your finances can bring you.

Want to go on holidays? Buy that new television? Have a cruisy retirement? Donate more to charity? Those are the tangible benefits of getting a little financial fitness. And new resolutions shouldn't just be a list of new things to do – so here's a mix of things to start doing, but also a couple to just stop.

Start making a budget Doesn't sound very exciting, does it? But it's immensely powerful. Planning – ahead of time – what you're intending to spend and on what things gives you control. It's a form of self-discipline. If you decide where your money will go, it gives you a reason to say "no" when the impulsive parts of your brain tries to tell you to buy that new phone, dress, game or pair of shoes. Being able to say (to yourself) "I don't have the money for that" is the angel on your shoulder that'll keep you on the straight and narrow.

Start tracking your spending The human mind is a complex beast – but also deceptively simple. In business, there's an old saw: "What gets measured, gets done". In our own lives, what gets recorded gets noticed. Whether you use a phone app, your bank's own internet banking feature (if it has one) or a piece of software specially designed for the purpose, you won't believe how impactful just knowing what you're spending can be. It can be confronting – "Did I really spend that much on eating out?" – but you'll be amazed at how quickly you start changing your spending behaviour.

Stop paying too much Our company gives every employee a "personal finance day" – a day of paid time to get our personal finances in order. Your business may not do the same, but you can still find time to do the simple things that'll make a difference. Go through each bill – phone, mobile, electricity, water, house insurance, car insurance – and call around for a better price. Then call your provider and ask them to match it. My mortgage provider took 0.2 per cent off my mortgage after a five-minute phone call. That's the equivalent of $60 a month on a $500,000 mortgage – every single month, thanks to one call. Most people who read this article will skip this step – don't let it be you.

Stop: Keeping up with the Joneses New cars, new boats, new televisions. Holidays, clothes, gadgets. It's very tempting to want what others have. But if you resist the urge, they'll end up being envious of what you have – a comfortable retirement. Let me put this another way. You can spend $100 today, or you can invest it and in less than 20 years (at 12 per cent) get paid $100. Every. Single. Year.

Start: Investing You're not going to get rich with money in a transaction account paying you no interest, or a term deposit paying only a little bit more. Investing can be risky, but done well, it's less risky than not investing at all. Invest in yourself – get better at your job (or another job) and earn a pay rise. Invest in your knowledge – understand what makes businesses tick and what separates the good from the bad. Then invest in quality companies at good prices.

Foolish takeaway

If the past three decades tell us anything, it's that a diversified portfolio can be a wonderful way to build your wealth. And the more you can save, the more money you can put towards building yourself a sizeable nest egg.

Happy New Year!

Investors, don't miss out: If you haven't taken the opportunity to view my brand-new report on Warren Buffett and two ASX shares Buffett could love, now is the time. Click  here to claim your free copy and discover two top ASX picks now.

Scott Phillips is a  Motley Fool investment adviser. The Motley Fool's purpose is to educate, amuse and enrich investors. This article contains general investment advice only (under AFSL 400691).

Read more: http://www.theage.com.au/money/investing/lose-weight-stop-smoking-invest-in-yourself-20150108-12k8ka.html#ixzz3OedwHn00

Posted by Scott Phillips - The Age on 14th January, 2015 | Comments | Trackbacks | Permalink

Rates may fall further before rebounding

When will interest rates rise from record lows? Financial market types have spent countless hours debating this question over the past year and a half, combing through statistics and carefully dissecting every utterance from the Reserve Bank.

But it appears we are no closer to the RBA pushing up borrowing costs anytime soon. As 2015 begins, most economists reckon rates are likely to stay at their record low of 2.5 per cent for several months more, and could even fall further.

When you look at the state of the economy, this may be surprising. Conditions are weak but not disastrous, and we are not in recession.

Australia's economy has faced much more dramatic events in its history, such as the global financial crisis, the 1990s recession, and the 1970s oil-price shock. Rates never fell this low in these instances.

So why do interest rates need to remain this low now, and maybe even fall further? The answer is that the normal or "neutral" level for the official interest rate – the cash rate – has changed, perhaps permanently. That means that even when it ultimately rises, it is unlikely to go as high as in the past.

The neutral level is the point at which the cash rate doesn't slow the economy, but neither does it stimulate growth by encouraging borrowing. Economists used to think it was about 5 per cent, but now Commonwealth Bank analysts say it is now 3 to 4 per cent.

So when economic growth returns to a more normal pace, which the Reserve Bank expects during the 2015-16 financial year, the cash rate won't need to climb as high as it has in the past.

This is partly because the gap between the cash rate and the rates that banks actually charge their customers has widened, which means the cash rate needs to be lower to have the same effect.

When the cash rate climbed to its recent peak of 7.25 per cent in 2008, the economy was also experiencing historic booms in mining and in borrowing by households. These are unlikely to be repeated, so there may be less need for rates that are as high.

All up, it suggests interest rates will stay low for much of 2015, and maybe even fall further. When they do rise – and borrowers should always assume this will happen – they probably won't rise sharply.

If the markets are right, the third of households with a mortgage can therefore expect their interest payments to remain unchanged, or even fall, over the first half of the year. For the far larger number of people with money in the bank, it suggests more disappointing returns on savings accounts.

Posted by Clancy Yeates - The Age on 14th January, 2015 | Comments | Trackbacks | Permalink

The fix is in and borrowers can beat the banks

It is usually never a good idea to bet against our big banks, except maybe when it comes to fixing your mortgage.

Researcher Canstar, which has analysed home-lending data going back 20 years, has found that in half the cases where a borrower takes a fixed-rate mortgage, the borrower has paid the lender less in interest than if they had taken a variable interest-rate mortgage.

The results overturn conventional wisdom, which says most borrowers who opt for fixed rate mortgages lose out to lenders.

It is surprising that the banks, with all their resources, get the calls on their fixed rate mortgages right only half the time. Perhaps it shows how hard it is to correctly forecast interest rates.

But for lenders' pricing of their loans it is not all about future interest rates. There is the cost of their finance and their competitive positioning with respect to other lenders.

They also know that fixed-rate borrowers are sticky. Borrowers face a "break" cost that covers the lenders' losses if interest rates fall in the meantime and the money can be re-lent only at a lower interest rate.  

Canstar's research finds the biggest winners over the past 20 years have been those borrowers who took a three-year fixed mortgage in November 2005. At the start of the period the cash rate was 5.5 per cent.

It increased to 5.75 in early May 2006 and steadily rose from there to reach a peak of 7.25 per cent in early March 2008, where it stayed until early September that year.

Canstar estimates these fixed rate borrowers with a $300,000 interest-only mortgage were ahead by about $15,000 over the three years compared with borrowers who have variable rate mortgages.

With the cash rate at a 50-year low and some very good fixed-rate deals on offer, interest in fixed-rate mortgages is running high. Canstar says more than 50 per cent of searches on its database of mortgage are for a fixed-rate mortgages compared to the more usual 30 per cent.  

So how good are the fixed-rate deals? Justine Davies, finance editor at Canstar, says the big banks' standard variable, or advertised rate of interest is about 6 per cent.

She says the advertised rates of smaller lenders are often lower. However, borrowers with a loan of at least $250,000 should be able to get a discount on the advertised rate. She says the major banks' average interest rate on a three-year fixed-rate loan is about 5 per cent.

Borrowers should be at least considering whether a fixed rate is right for them. After all, it is not like the cash rate is at normal levels.

The cash rate will have to return to normal levels eventually; though, some market watchers are forecasting that rates will fall further next year, perhaps by one percentage point. That perhaps means there is no hurry to fix.

Posted by John Collett - The Age on 14th January, 2015 | Comments | Trackbacks | Permalink

Melbourne property market: more sellers making a profit

 THE waiting game is paying off for a growing number of homeowners, with more than a third at least doubling their money when selling.

Melbourne is one of the top spots in Australia for making a profit on property according to CoreLogic RP Data — and people that sit on their homes are the most likely to reap the benefits.

Only 6.5 per cent of sales in the September quarter last year failed to match their purchase price, while 35.7 per cent sold for double or more.

The number of people taking a hit when selling their property has fallen from 6.6 per cent the previous quarter and 7.4 per cent the previous year.

Holding on to a property for the long term was the key to value growth, according to CoreLogic RP Data research analyst Cameron Kusher.

People who made a profit owned their home for an average of 9.9 years, while a 16.8 year wait was the average for doubling the price.

Sellers in Knox were the most likely to pocket a profit, with 98.6 per cent of sales beating the previous price.

Boroondara, Bayside and Monash sellers made the most lucrative gains, with a median windfall of more than $400,000.

The gross profit in Monash was Melbourne’s largest at a whopping $196.7 million in the quarter.

Harcourts Judd White director Dexter Prack said highly regarded schools and infrastructure were the municipality’s main draws.

“Particularly in central Glen Waverley, the demand has just been absolutely crazy,” Mr Prack said.

Asian buyers had a strong presence in the market and were willing to pay a premium to secure properties in the school zones, he said.

Rapid price rises in Monash had pushed buyers to neighbouring areas such as Wantirna.

However, there was no sign of a slowdown as price records continued to tumble, Mr Prack said.

The staggering $2.055 million paid for a basic home at 18 Montclair Ave, Glen Waverley, showed the fierce competition for land.

The buyer had homed in on the 746sq m block’s potential and was planning to knock down the existing house, Mr Prack said.

Posted by Nicole Engwirda - Herald Sun on 13th January, 2015 | Comments | Trackbacks | Permalink

How to get the most profit from your property and avoid a loss

 THE number of properties selling for less than the owners originally paid has increased, with new figures revealing losses worth $383 million in the September quarter.

The latest CoreLogic RP Data, Pain and Gain report on the September quarter revealed 9.3 per cent of properties that sold during the period were for a loss — up from 9 per cent in the previous quarter.

The average loss on a sale was $62,246.

While the vast majority of sales throughout Australia were for more than owners originally paid, the report shows there are two types of sellers who cop a loss.

Those in regional areas were hardest hit with loss-making sales, as were sellers who didn’t hold on to their properties for long.

Of the properties that did sell for a profit during the quarter, a third sold for more than double their original price. 

The average time owners had to hold on to their property to double the price was almost 17 years.

The number of sellers doubling their money has been fairly stable in the past two quarters, but is well down on late 2007 when it peaked at 43 per cent.

Profits on properties sold during the quarter reached $13.5 billion with the average profit made by sellers on resale $223,870.

Sydney was the best market for those looking to turn a profit on resale with only 2.6 per cent of sales during the quarter at a loss.

Perth had 6 per cent of sales at a loss and Melbourne 6.5 per cent.

In other capital cities the proportion of loss making sales increased slightly with Adelaide recording 9.5 per cent of sales at a loss, Brisbane 11 per cent, Hobart 15.8 per cent and Darwin 9.6 per cent.

CoreLogic RP Data research director Tim Lawless said the number of loss making sales was still considered to be at a relatively low level.

He said if there were a few more consistent quarters of an increase in loss making sales then he would consider that the market had bottomed out, but it was not at that stage yet and it was not unusual for fluctuations from quarter to quarter.

“When you look at the different regions you can see a lot of differences (in how many sellers made a loss or profit),’’ he said.

“Sydney is such a strong market, it has had only 2.6 per cent of all sales at a gross loss, that is hardly anything.

“While in regional Western Australia and regional Queensland about 20 per cent of sales were for a loss.’’        

Mr Lawless said markets based around mining towns figured prominently in areas making a large proportion of loss making sales.

Coastal areas also had a high percentage, but that was on the way down.

Mr Lawless said he was not surprised to see that loss making sales had increased in Perth, Darwin and Canberra.

“Really that slow down has been happening over the past six months,’’ he said.

“It is definitely a trend more in those cities.’’

The report analyses how much an owner pays for a property and how much they resell for to determine whether a gross profit or loss has been made.

It does not take into account any of the other costs associated with buying and selling.

Posted by News Limited Network on 13th January, 2015 | Comments | Trackbacks | Permalink

Buyer's guide to beachfront properties

Tom Pikusa and his wife, Sara Hinchey, both barristers, bought a beach house five years ago. For the self-employed couple in their early 40s, the four-bedroom house on a large block of land in Rye on Victoria's ­Mornington Peninsula offered a source of retirement income.

"We thought we needed to think about how we want to transition out of being ­barristers at some point," says Pikusa.

It helped that they were familiar with the area and knew there was a strong demand for rental beach house accommodation. In fact, Hinchey had bought a small house in neighbouring Blairgowrie early on in their relationship after getting frustrated at how much it cost to rent in the area.

Pikusa and Hinchey paid just under $700,000 in 2009 for the Rye property. It was a good call.  Isabelle, as the house is named, last year brought in revenue of $75,000 – three times what it would make in long-term rental income. After (quite considerable) expenses, the net revenue is about twice the long-term rent they would otherwise get. 

"It's an amazing return," says Pikusa.

Theirs is an unusual strategy. The beach house – a source of holiday memories for successive generations of Australian ­families – has never featured strongly as a commercial investment proposition and most owners, such as Sydney retirees Jim and Jolijne Meynink, keep it that way.

The Meyninks bought a shack at Tuross Head on the NSW South Coast in 2011. They use it throughout the year, but rent it out over summer.

"It is a double block which we are ­subsidising [by renting out] to build on so we can accommodate a growing family and grandchildren," ­Meynink says. He doesn't plan to sell the house but wants to pass it on to his children.

Making money out of a beach house is a tough business and price growth alone shows why.

To look at one example, the median value of an apartment in Surfers Paradise on Queensland's Gold Coast – the best generic indicator of beach-location investment dwelling stock – has dropped more than 16 per cent over the six years to September, Domain Group figures show. In the past 30 years, the median unit price on the Gold Coast has risen nearly 3½ times from $97,000 to $335,000, not much more than the near-tripling of the consumer price index over the same period.

Not only do beach houses offer the prospect of a worse capital gain than urban residential property, the associated costs are higher. Property managers tend to cost more. Custom can be patchy. And the market can be fickle, especially when there is a large supply of similar product competing for business. "As a general rule beach houses aren't a good investment because they generally have higher vacancy rates and are higher risk," says Sydney buyers' agent Rich ­Harvey. "As a general rule, beach houses are not something we recommend . . . You can get better yields and capital gains from other areas."

Pikusa and Hinchey, who have made the beach house game work for them, treat the house as a business. It's a commitment that takes up a lot of time. They have an agent who oversees all the online bookings and money but, even so, one of them checks out the house after each visitor has departed. They don't use Isabelle themselves.

"We've never stayed at the house," Pikusa says. "It's just part of the commercial ­property business. It's like an investment."

Head to the AFR for the full story and buyer's guide.

Read more: http://www.smh.com.au/business/property/buyers-guide-to-beachfront-properties-20150110-12ll4l.html#ixzz3OeeWxiHl

Posted by Michael Bleby -The Age on 9th January, 2015 | Comments | Trackbacks | Permalink

Eight things your bank would never ask you

New ways to bank – by telephone, the internet and now your mobile – have saved us a lot of time but have also opened up opportunities for fraudsters.

Their tricks normally involve pretending to be your bank, whether on the phone or via email.

After convincing you that they are genuine, they ask you to carry out various plausible-sounding actions that will result in your account being raided.

Here are eight things that fraudsters might ask you to do – but your bank never will.
  • Call or email to ask you for your full PIN or any online banking passwords If your bank does contact you, perhaps to check that a transaction was really made by you, it would not ask for more than three digits from your PIN to confirm your identity, and would never ask for online passwords.
  • Send someone to your home to collect cash, bank cards or anything else Having posed on the telephone as a bank employee to extract key security information such as your full PIN, the criminals may say they are sending an official courier to your home to collect the corresponding card. These couriers will have bogus "official" identification.
  • Ask you to authorise the transfer of funds to a new account or hand over cash Often criminals, posing as a bank, will instruct you that your account is under threat – usually from a "corrupt employee" or "cyber criminals". You will be instructed to make an online transfer of money into a new "safe account" – actually the fraudster's – or hand cash to a bogus employee.
  • Ask you to carry out a 'test transaction' online Criminals pretending to be from a bank sometimes email customers asking them to perform a "test" transaction online, perhaps because of a "technical problem" on their account.
  • Send an email with a link to a website that asks you to enter your online banking details This is the well-known "phishing" scam.
  • Ask you to email or text personal or banking information Even if the email address appears to belong to the bank.
  • Provide banking services through any mobile apps other than the bank's official apps To download your bank's mobile banking app, follow the link from its official website.
  • Call to advise you to buy diamonds, land or other commodities Reputable investment firms do not cold-call. Fraudulent "boiler rooms" can be very persistent and persuasive, so just put the phone down. 
The new year will no doubt see the scamsters try more and more inovative ways to fleece us. So beware.

Read more: http://www.theage.com.au/money/saving/eight-things-your-bank-would-never-ask-you-20150109-12kyxg.html#ixzz3OedPUiMw

Posted by The Age (Money) on 9th January, 2015 | Comments | Trackbacks | Permalink

A new survey reveals an alarming number of people don’t understand the rules of buying at auction

 AUSTRALIANS might love to talk about property, but a new survey has found an alarming number don’t understand the buying process.

The survey for law firm Slater and Gordon found 42 per cent of potential bidders at auction didn’t even know there wasn’t a cooling-off period when buying at auction.

While most states offer cooling off periods to those who buy through other sales processes, if you buy at auction it is unconditional.

The survey of more than 2000 people also revealed 15 per cent of those intending to bid at auction had not sought legal advice beforehand.

Slater and Gordon lawyer Robert Kern said the results were concerning as there had been a number of huge auction results toward the end of last year and the auction market was starting to pick up again.

He said some bidders at auction didn’t realise they couldn’t change their mind if they were the successful bidder on the day.

“If you’re intending to buy at auction, or even think you might, you would want to do your research properly because, once you sign on the dotted line you’re obliged to buy that property,’’ he said.

“It is very easy to be lulled into a false sense of security, especially if people involved in the selling process say to people (buyers) look there is nothing to worry about there is no concerns, then if something pops up obviously they are taken aback.

“Basically the top three tips (when looking to buy) in order are investigate, investigate and investigate.’’

It was also important to make sure solid finance was in place before bidding.

“For example if after the auction it turns out the property is worth more, or less, than what you were led to believe, your financial institution may not being willing to provide finance,’’ he said.

If you are unable to settle on the sale you could lose your deposit worth thousands.

Mr Kern said this had been a big problem during the GFC.

“We do see it definitely from time to time,’’ he said.

“It is generally not as big an issue when the times are good and the valuations are going up, but it is generally a bigger issue when property values are falling. There was definitely a spike in those sorts of issues around the Global Financial Crisis time.

Posted by Newss Limited Network on 7th January, 2015 | Comments | Trackbacks | Permalink

Property lessons to take into the new year

 If only…

Good advice given too late can be as welcome as a scented candle for Christmas. So, for those of you planning to embark on a property-related adventure this year,  here is some advice from those who wished they'd known then what they know now. 

Use a property lawyer

Jason Scott, from Tipsta, urges anyone who's looking to buy a property to use an experienced property lawyer rather than a conveyancer. Jason's plans to  buy a one-bedroom apartment in Northcote were almost derailed when the bank used a different method of calculating the size of the property to the builder, which reduced the amount they were prepared to lend him from 90 per cent to 80 per cent of the purchase price.

"We had to come up with another 10 per cent for the deposit and do that fairly quickly," Jason says. "The whole process was extremely stressful."

Be selective with your property manager

With professional property managers engaged to look after her three investment properties, Maureen Pound had been happy to take a "hands off" approach until she received a call advising her of issues relating to her Port Melbourne apartment.

She was appalled to learn not only that her tenants were suffering health issues and property damage due to mould, but that they had reported the problem five months earlier and the property manager had failed to act – or inform Maureen.

"(The property management company) have all this high tech online information, from the surface it looks really good, but I guess I didn't ask enough questions or make a good decision to go with them in the first place."

Be very selective when appointing a property manager, Maureen advises.

Be open to new ways of doing things

Phoebe and Russell Cameron were keen to stay and rebuild on their inner-city block when the existing home had passed its use-by date, but access to their irregular-shaped land made traditional building unrealistic.

Undaunted, the enterprising couple investigated their options and decided to have their new home, over two-levels, pre-built, with its modules lifted into place by crane like giant pieces of Lego. Two years on, Phoebe says she wouldn't change a thing. "It's a terrific way of doing it, especially if you have site constraints like we did."

Phoebe's advice to others is to consider designing a pre-built home, and make sure you put a lot of thought into the design.

"Have a think about how you want to live in the home."

Be prepared for bureaucracy

Budget was the key driver for James Kahnbach when he decided relocating a house from Melbourne was preferable to having one built on his property in Maldon.

While James was very pleased with the result, a cosy three-bedroom home that was originally part of the 1950s Olympic Village in Heidelberg, he was shocked at the time and energy it took to deal with trades people and council bureaucracy.

He cautions others who are considering the same tactic to prepare themselves for endless paperwork.

"Getting the house here was the easy bit."

Seize the day

Yolanda and Russell Forte planned to sell their South Gippsland property when they retired but, thinking selling would take a couple of years, they decided to treat themselves to a spa in the meantime.

The couple quickly became spa devotees, so when their home sold within eight weeks, they got back on the phone to Endless Spas to order another one for their new property. Russell says they regularly use the swim jets and the four-seater spa with family and friends.

"We use it 12 months of the year. If we knew then what we know now, we would have bought it years ago," Russell says.

Posted by Kate Robertson - The Age on 6th January, 2015 | Comments | Trackbacks | Permalink

New year, new home: Financial planning for 2015

Whether you’re looking to upgrade, downsize or even purchase your first home in 2015, it makes sense to financially plan ahead.

Futureproof your next move

Principal at Hillross Aspire Lisa Barber has more than 20 years of experience advising clients on how to successfully plan for a property purchase. She says a critical factor is looking ahead and selecting a property that matches your future plans.

“Think about how long you want to hold the property for. Do you plan to live in it for a year while you renovate it, then sell it? Are you planning to live there for five years? Or do you see it as a home you will be in for decades? Your answer will influence the location, style and cost of the property you buy.”

How much can you really afford?

Despite the emotional nature of buying a home, Barber advises clients to be “very honest and realistic when they crunch the numbers, and always stick to their limit”.

She says buyers should apply ‘pressure tests’ to check their personal affordability status.

“First, ensure you can afford to make repayments at 2 per cent more than the current interest rate. If a 2 per cent rate rise would put you under significant financial pressure, you may need to consider dropping your upper limit.”

The other pressure test is to ask yourself if you have the emergency funds to pay the mortgage for a few months if you find yourself in difficult circumstances.

“Around 1 in 3 Australians will be made redundant in their lifetimes. Many also have to stop work for a period due to illness. You need something in reserve so you can financially cope with such situations.”

Tap into professional advice

Barber says using a buyer agent can help you purchase the property of your dreams at a price you can afford.

“As well as having access to ‘off-market’ and ‘urgent sale’ properties, they will also negotiate on your behalf, which could save you thousands.”

While buyer agents charge a fee for their services, Barber says this is often offset by the savings they achieve on the purchase price.

“I also advise property purchasers to see a financial adviser. Financial planners can assist you to work out how much you can afford, negotiate competitive rates from lenders, and give you peace of mind around what’s possible given your unique financial circumstances.

“Unlike family and friends, you can be frank about your finances with a financial planner, who can then provide you with objective, neutral advice.”

Think different

Barber says good financial planning differs at every life stage. “If you’re looking to retire and downsize from the family home into a unit or townhouse, you will need to make sure you have enough funds left over to support your retirement lifestyle.

“Retirees might consider buying off the plan, as many new builds include features they might need, such as a lift.

“Buying off the plan can offer savings because you buy the property at today’s price but don’t pay for it until completion. This strategy can also work for first-home buyers.”

Meanwhile, if you have a growing family and want to upgrade to a larger property, Barber says you might need to think outside the square.

“In capital cities in particular, there’s a big jump in price if you want to move from a unit to a house with a garden. One option is to keep and rent out your smaller property while you rent a larger property in the area of your choice. This can effectively buy you some time to save the deposit on a larger home.”

Making a property purchase in 2015 may be easy with a little financial planning, so obtaining some expert advice could be the best decision you make next year!

Posted by Cathy Wever - Domain (Fairfax Media) on 6th January, 2015 | Comments | Trackbacks | Permalink

Tips to make buying a holiday home a worthwhile investment

 EVERYONE wants to make the holiday feeling last as long as possible which makes buying a holiday home suddenly seem like a good idea.

And it can be — just follow the experts tips and buy with your head and not your heart according to Real Estate Buyers Agents Association president Jacque Parker.

Ms Parker warns would be holiday home owners not to fall for the “romance’’ of a holiday home and use your head to make the best investment decision.

“People generally buy holiday homes with the intent on returning for regular holidays but should also consider the investment merits of such a purchase,’’ she said.

It was important to investigate rental yields, the cost of maintenance and things such as management fees and cleaning not just how far it is to walk to the beach.

Here are her tips for buying a holiday home.

1. Never buy a holiday home at the peak of the market.

“When the property market is flat a quality property in a good location will always find a buyer,’’ she said.

Ms Parker said a good question to ask yourself was: Would this property generate a lot of interest in a buyers’ market?

“If the answer is no, be very careful what you pay for it.’’

2. Have a buffer of funds to cover unforeseen expenses

Ms Parker said even partially leasing to other holiday-makers could incur unforeseen costs.

“Consider having an emergency buffer for common items that may break down more quickly or

require replacement due to increased wear and tear.’’

3. Consider ALL realistic costs

Ms Parker said many holiday home buyers forgot that a second home incurred a second lot of

expenses: electricity, water and council rates, maintenance, cleaning, annual pest

inspections, land tax and insurance.

4. Is it cheaper to holiday-lease yourself?

“Consider the long-term benefits of holidaying in the same place on a long- term basis. Is this really what you want? Financially, would you be better of holiday leasing rather than carrying the costs (and potential stress) of a holiday investment?’’

Posted by News Limited Network on 5th January, 2015 | Comments | Trackbacks | Permalink

House hunting: even real estate experts can get it wrong

Recently I went through the process of trying to buy an investment property. For me this should be a simple process, right? After all, not only do I run a business in Sydney where we assist clients by identifying quality property and negotiating the deal for them, but I also advise people on national television how to purchase real estate across the country. 

Well I am here to say that this was no fait accompli.

There are so many variables when buying property. Every real estate negotiation we are involved in has, at the very least, subtle differences. From the outset I expected to be able to navigate these issues with ease and so I did not involve anybody within my team until the final stages. 

However, this was my mistake, and I will take you through the litany of rules (my own!) that I broke as a result of not asking for help.

Now, I have always harboured a bit of a dream of owning an old shop and running my business in it. So when a heritage Edwardian terraced shop came on the market a few doors up from my office, my interest was piqued.

First rule I broke:

Harbouring a romantic attachment to a particular style of property, particularly one that is to be an investment. Due to this, I was more susceptible to behaving emotionally during the purchase process.

Second rule I broke:

Looking for property seriously before my finance was approved. I had been talking about buying an investment property for some time and had made initial inquiries with the bank, but was a long way from gathering all the documents required  for pre-approval. 

The risk I ran was that another buyer would be in a much stronger position to act and I would end up missing out purely because I wasn't ready.

This shouldn't have been a major risk in this case, since the property was a little overpriced and the market was quite flat, particularly for a property that had a specific buyer profile.

I was a fairly unique buyer in the way that this property would suit my needs. It would function as a dual purpose for me: part business premises and part investment. As well as the original shop front, this building housed a three-bedroom residence and I could have easily separated the two to create an income stream. 

Third rule I broke:

Not looking for an investment property with maximum buyer appeal. In my business we always aim to buy real estate for which owner occupiers will compete when it's time to sell. 

What was I doing here? I was interested in a property that was most likely to appeal to local small business owners like me. 

And how many of these are likely to be in the market at the same time to vie for such a property?

In my own defence, I will say that this property was unique and the most recent comparable sale was made two years earlier. And we do recommend looking for scarcity when looking at investment property.

Fourth rule I broke:

I did drag the chain a bit when it came to getting my finance approved. This meant the longer I took the more opportunity there was for another buyer to come along, which would erode any advantage I had through being the only buyer showing serious interest.

This property had been on the market for two months when I first inspected it. And it ended up taking me another two months to get my finance arranged and due diligence completed. It had been advertised that whole time with a price of "POA", which is usually agent code for "overpriced".  

I had many discussions with the agent over this period, with the prime objective of developing an understanding of where the vendors were at regarding their price. A crucial part of a selling agent's job is the managing of their client's expectations. I also wanted to understand how this function was being performed – or whether, in fact, it was being addressed at all. To be frank, these conversations were very unenlightening and I was beginning to break another rule.

The fifth rule I broke:

Showing my frustration with the selling agent.  It's very hard to negotiate in the dark. I had little faith in the agent's ability to be fully abreast of their client's position. Not one of my direct questions got a direct answer. I kept getting rehearsed dialogue. And none of it rang true nor did it give me the confidence to proceed with negotiations.

I think the core problem here was the approach of this particular agency. Once an agent lists a property, it is then open slather within the office as to who actually sells it. I was concerned, and rightly so, that the agent I was dealing with wasn't the one actually communicating with the vendor. 

Ideally the agent you are negotiating with is also the one directly working with the owners, otherwise competing agendas can come into play. For example, the listing agent may downplay the interest of buyers who are dealing with other agents in the same office, as his/her commission will be reduced if another agent's buyer clinches the deal. He/she would want to list AND sell the property in order to maximise his/her earnings. 

So, if the agent isn't managing the vendor's expectations, who or what is helping them to understand the value of their property? The thing is, if it's overpriced, nobody will make any offers. Then the owner gets no feedback regarding price. So we, the buyers, need to do the job of the agent. A cheeky offer is sometimes needed as the opening gambit so that the owners can start the process of lowering their sights. But this is a delicate process, as you don't want to insult the vendor and negatively impact subsequent negotiations. 

I did my price research and established a range within which I believed the property to be worth. But this was less than the price quoted by the agent. So I decided I needed to make an initial offer at a figure less than I was prepared to pay in order to start the conditioning process.

The sixth rule I broke:

Making an offer before I was ready to sign a contract. Not that this really had much of an impact in this instance, nevertheless, we usually advise against doing this as an offer lacks strength if it can't be followed through with action.

The answer to my offer was, as I expected, "no". So I let it sit for a while. There was no point increasing my offer for two reasons: I wasn't ready, plus I figured the vendor needed to sweat a bit. No counter offer had been forthcoming and I couldn't work out whether this was because the owners were rigid on their price or whether the agent was not capable of negotiating. In fact, it took days for the agent to even get back to me after I made the offer and in the back of my mind I harboured doubts over whether they had even passed it on to their client.

In the meantime I finally got my finance pre-approved, then immediately ordered the bank valuation and building and pest inspection so I was ready to make my final offer unconditional. 

The seventh rule I broke:

Taking the agent's obtuseness personally and almost cutting my nose off to spite my face. This particular agent was so difficult to communicate with that I was very tempted not to submit my final offer. I did in fact delay making an unconditional offer following numerous unproductive conversations after which I was dubious about the vendor's commitment to selling. I also doubted the existence of another serious buyer about whom the agent suddenly started referring to. It was at this point that one of my staff gave me a serious talking to and reminded me of all the conversations that we have with our clients. 

We advise clients all the time on pricing and purchasing strategy. When an agent brings up the subject of "another buyer making an offer" it is often hard to decide whether or not they are bluffing. But if you have done your price research and have a clear understanding of the property's value, it doesn't really matter whether this other buyer exists or not. If they don't exist, it's merely the agent using it as a ploy to negotiate with you (a tactic required if their negotiation skills aren't well honed). If the buyer does exist, you will either pay more than them or not. It is better not to be emotional at this stage.

Certainly we are able to be much more clear-headed than our clients. And as a result, they can have a sense of confidence when we approach negotiations on their behalf. I must say that after my teammate took me aside and reminded me of what was important, I was able to continue with a different mindset. I remembered that I did want the property and was prepared to pay what I had deemed to be a fair price, but no more. Given that I still hadn't made my maximum offer, I would kick myself if the property sold to someone else for less than I was prepared to pay. So I decided to do the very thing that I would have recommended to a client under the same circumstances: put my final offer on a signed unconditional contract and submit it with a deadline for exchange.

One rule I didn't break:

I did my pricing research and narrowed down a range in which I believed the property to be worth. And despite my emotional attachment I was able to remain clear-headed about the value and the price I was prepared to pay, which was at the lower end of that range due to the limited market for this type of property. In the end another buyer was prepared to pay more than me and they bought it. So, I understood value, I set a limit and I stuck to it.  

And at the end of the whole transaction, I have no regrets.  Well, maybe one – I really should have got my act together earlier so that when I was ready to make an offer there were no other buyers in the wings. 

The greatest lesson through this whole experience for me was the reminder of how stressful and confusing it can be to buy a property. And this was an investment for me, not even a home to live in! Not only that, but I do this for a living. In reality, it has further convinced me of the value that we add to our clients' property buying experience.

Veronica Morgan is the founder and principal of Sydney buyers' agents Good Deeds Property Buyers, and co-host of Location Location Location Australia on Foxtel's The Lifestyle Channel.

Posted by Veronica Morgan - The Age on 5th January, 2015 | Comments | Trackbacks | Permalink

6 Property settlement tips for home buyers

After celebrating success at auction or negotiating a private sale, the next milestone in your property-buying journey is settlement. Here’s what you need to know.

1. Understand settlement

Property settlement is an official process usually conducted between your legal and financial representatives and those of the seller. It’s when ownership passes from the seller to you, and you pay the balance of the sale price.

The seller sets the settlement date in the contract of sale and the property settlement period is usually 30 to 90 days.

2. Arrange your final inspection

You’re entitled to inspect the property at any reasonable time during the week before settlement. Contact the agent to arrange this inspection.

The seller must hand over the property in the same condition as when it was sold. Check all the items listed in the contract are there and in the right condition.

3. Organise insurance

Your lender will usually recommend you take out building and contents insurance effective from the date the seller signs the contract. This is to safeguard their interest in the property, as well as your own.

4. Check measurements

Your legal practitioner or conveyancer will send you a plan of the land so you can check all measurements and boundaries correspond with the Certificate of Title. You should confirm if so, or alert them to any discrepancies.

Make sure you provide documents and other information promptly when requested, as delays can be costly.

5. Understand outgoings

At settlement, all outgoings such as rates and other charges are adjusted between you and the seller. The seller is responsible for rates up to and including the day of settlement. You are responsible from the day after settlement.

You are also responsible for paying land transfer duty (formerly known as stamp duty in Victoria) on the sale. It is usually paid at settlement but you have up to three months after settlement to pay. You cannot receive title to a property until you have paid the duty.

6. Collect the keys

Once settlement is completed, you can collect the keys from the agent and take possession of the property.

For further tips and insights speak to your estate agent. 

Posted by Claire Noone - realestate.com.au on 3rd January, 2015 | Comments | Trackbacks | Permalink

The asset value of birds in backyards

An estate agent in Melbourne's outer eastern Diamond Valley has listed amongst the assets of a family home he is marketing that "abundant birdlife adds to the appeal".

An American study has recently gone further in suggesting that "desirable avian residents" can add actual dollar value to the price of a home. And taking this as a lead, UK realtors are starting to wonder if the same holds for the picturesque British country properties they market?

A bird lover who lives near a rural stream in England (good for Egrets), who locks up his cat during bird breeding season, and who leaves shed doors open for swallow nesting - among many mindful bird charming strategies, more than less seriously suggests that in future, prospective buyers of his house might be presented with a bird species list to illustrate its biodiversity credentials and thus its enhanced value.

On an "ambience factor rating" Matthew Rice reckons a Nightingale should be worth 20 points, a Barn owl 10 points, swallows and doves and house martins worth five points apiece, and so on. 

Peter Koiker of Barry Plant Diamond Creek reckons that while he did point out the bird life and the treed views in spruiking the above-mentioned property, and knows "that people like it," he's not sure that in Australia they would really pay for the company of wild birds, at least not in his neck of the woods "which is full of native birds".

But there are a lot of folk who take the task of encouraging wild birds to their houses as a very serious business and a national organisation, BirdLife Australia that is very keen to encourage particularly suburban householders to make viable habitat in their gardens "to create bird friendly spaces".

In their ongoing research, education and conservation programme, "Birds in Backyards", the organisation which has a membership growing by about 10 per cent a year, says, "we all have a responsibility to ensure our biodiversity is maintained".

"Cultivating the nectar plants and keeping up the water that native birds need is also a way of responding to the loss of small birds from our parks and gardens."

When Phillip Island birders Sally and Derek Whitehead were laying out the garden of their new Rhyll house three years ago, Sally says the whole planting scheme of massed Correas, Banksias and Grevilleas was designed "not just for the aesthetics but so there is always something flowering throughout the year".

Ensuring abundant nectar and lerps - or sweet larvae on which some species feed - "and having birdbaths dotted all around the place for Wattlebirds, Honey-eaters, Spinebills, Rainbow and Musk Lorikeets, and the Magpies and Ibis that visit too, means we can do a lot of passive bird watching while sitting in an armchair at home".

"We're not obsessive twitchers," she says. "We won't drive halfway across the country just to see one bird. But we do take some epic camping trips around Australia.

"But sometimes too, it's just as interesting to see how extraordinarily well camouflaged a Musk lorikeet is when he's 20 metres up in the gum tree above our house."

Mrs Whitehead says "the grevilleas with big pendulous flowers can be very enticing as the birds like to hang off those. And the big Moonlight grevilleas are really good because they seem to flower nearly all year round."

Stuart Dashper, vice president of BirdLife Melbourne, a city branch that meets monthly in Balwyn and Carlton, says that the long-term movement towards the planting of more flowing gums in suburban parks and gardens has fostered "a large change in the urban bird populations over the past 15 years.

"The result is a huge explosion in the populations of Rainbow Lorikeets which, in the past, were hardly ever seen in the city. A lot of honeyeaters were also historically rare until recently."

This is all good in his eyes. What could be done better, "what's missing", he says "are very dense plantings of understory plants; the lower (native) shrubs and bushes that encourage the smaller birds like Wrens and Red-browed finches. The smaller thicker bushes are where they can hide from cats and larger birds."

"So it's not only about native plants, it's about variety and plant structure as well."

In Mr Dashper's small Northcote garden, a few streets back from what he sees as a very successful exemplar of revegetation, the Merri Creek corridor, he says that one of the most rewarding single plants he has are Kangaroo paws "which bring in the New Holland Honey eaters. They drink the nectar out of the flowers.

"They don't stay in my garden. They live along the creek. But they will come and visit."

Both Sally and Stuart say that it takes just little honey pot to entice a native bird to your place and that even several nectar plants flowering in pots on an apartment balcony might be enough to earn a flying visitor or two...

Posted by Jenny Brown - The Age on 3rd January, 2015 | Comments | Trackbacks | Permalink

Traditional quarter-acre blocks outperform high-density apartments for long-term growth

The old adage that "land appreciates while buildings depreciate" can prove true in the right location.

More Australians are swapping traditional quarter-acre blocks for apartment living, but experts say they could be missing out on substantial capital gains.

It's the old adage that "land appreciates while buildings depreciate", and backyards also give owners the option to add value and expand their home by installing a pool, a garage – or, if space permits, a tennis court. 

Hockingstuart sales manager in Mentone, Simon Wendt, expects house price growth to continue to outstrip units as homes on a full block of land become more rare.

"Even if you need to pay a little bit more to get something with a backyard, it is going to be a lot more valuable in the future," he said. 

Domain Group data shows the national median house price grew 9.4 per cent over the year to September, while units climbed just 6.8 per cent.

But just like anything in real estate, location is key. 

Valuer and buyer's advocate Greville Pabst, of WBP Property Group, said land in the inner-city areas of Melbourne was particularly attractive and becoming more scarce with the amount of medium and high density developments.

Mr Pabst said those properties with a backyard, or land around them, would be more in demand and appreciate better in value.

"Land is the key attribute that drives value, so the more land that is ascribed to a property, generally the more valuable the property," he said.

"[If] you can drive in via a laneway at the back or side and you can bring a car off the streets, that certainly does ascribe value to a property". 

He said backyards with enough space to accommodate a storage or garage would also appeal to many people.

Five Squared developer Ashley Lewis, who has developed several large homes in Melbourne's south east, has seen more first and second-home buyers being lured to the outer suburbs for the "backyard lifestyle". 

"To get a home at an affordable price where you can get that backyard, people are now looking at these outer-suburban land subdivisions as a viable and really the only alternative to having that backyard lifestyle that people want," he said. 

"A lot of the buyers want a block where they build a nice home centred around a garden with a nice alfresco area, and designed to make maximum use of the garden space."

Posted by Christina Zhou - Domain on 30th December, 2014 | Comments | Trackbacks | Permalink

7 tips for a successful sea change

'Tis the season when Aussies love to go on holidays, wind down and dream of a better life. One without a crippling city mortgage, where work doesn't equal stress, with plenty of time for afternoon surfs and relaxing with family and friends. Ahhhhh, the serenity…

After Christmas we make our annual pilgrimage up, down or along the coast and it doesn't take long until we find ourselves staring longingly at the windows of real estate agents. We then sneak a peak in the property section of the local paper, check out a few open houses and before you know it we are seduced by how much we can get for our money! The planning starts – we figure out how much our city home is worth, imagine selling up and moving to the coast to start our new, unencumbered life.

Tree and sea changers often fall into the trap of thinking that their whole life will be like a holiday if they can move to their favourite part of the country. But often the reality is far from that. In fact, a large number of people who make this move realise within the first year that they have made a mistake. So, this is NOT a decision to be made in haste.

I have met a lot of sea/tree changers whilst filming Relocation Relocation Australia and Location Location Location Australia. My experiences with them have taught me a great deal about the risks entailed in making such a big move and what to do to mitigate them. The very first step is to remove the rose coloured sunglasses and have a realistic look at all the pros and cons. Advertisement 

A sea or tree change needs to be approached in two stages: firstly, make sure that the move is really the right thing for you in the long term and, secondly, if it is make sure that you make wise real estate decisions. Because one of the biggest lessons that I have learnt through helping people on the show is that urban real estate rules simply do not apply in regional areas. 

Even though it's such a big move with potentially huge ramifications, plenty of people love the idea of a sea or tree change. So if the drawbacks aren't scaring you off, following are seven things I believe you should consider.

1. Start with a plan and invest in research. This is not the time to take a plunge and "see what happens". You need to consider things like employment, access to health care, finding new friends. And if you are planning your retirement, how will you feel once your adult kids start to have their own children and you won't get to see them regularly?

2. Visit the area many times in different seasons so you can fully appreciate what it's like in both busy and quiet times. Try to go where the locals hang out and imagine the daily grind rather than holiday excitement.

3. It's crucial that you learn local property market dynamics and pricing. Property will probably take a lot longer to sell than in the city and you need to know the features that locals look for in real estate and what they shun.

4. Never buy a property after only one inspection! It doesn't matter where it is. It is always cheaper to get on a plane and take another look than to make a mistake and buy the wrong property.

5. Be critical about property values. Don't overpay through having a city mentality. Just because you get a lot for your money in relative terms doesn't mean it's good value. 

6. Be wary about selling out of a stronger market because capital growth in regional areas is not assured. You don't want to be trapped there if it turns out to be the wrong thing for you.

7. It may sound odd for a buyers' agent to say this but don't be afraid to move there and rent for a while. It seems like a massive upheaval to do this but it's nothing compared with the stress associated with having to sell a short time after buying if it doesn't work out. No amount of research and planning will prepare you better than actually "living the dream".

Now if you carefully plan and do not rush this process you will increase your chances of making a wise decision and living with no regrets – so you can truly enjoy life in the slow lane. 

Posted by Veronica Morgan - The Age on 29th December, 2014 | Comments | Trackbacks | Permalink

Property prices: What to expect from real estate in 2015

 LOW interest rates — and forecasts of more cuts in the coming months — look likely to make real estate an attractive investment in 2015.

Housing has been grabbing the headlines — particularly in the sizzling Sydney market — but other types of property investments have also been putting money in people’s pockets this year.

Figures this week from CoreLogic RP Data’s daily home value index show the average growth in home values across the major capital cities was 8.4 per cent year-on-year, led by Sydney’s 12.7 per cent growth and Melbourne’s 7.8 per cent rise.

Growth in Brisbane and the Gold Coast (5.3 per cent), Adelaide (4.7 per cent) and Perth (1.4 per cent) has been more subdued, but no residential markets matched the 20 per cent-plus growth in sharemarket-listed property trusts.

Here’s what economists and real estate experts are expecting in the year ahead from residential and commercial property and property trusts.


SQM Research managing director Louis Christopher said he expected 2015 to be another positive year for residential property owners.

“Basically the money markets think it’s a dead certainty rates are going to be cut by April 2015, with the chances increasing of another rate cut in June,” he said.

“If such rates cuts happen, housing markets will be boosted throughout the course of the calendar year.”

Real Estate Institute of Australia CEO Amanda Lynch said continuing low interest rates and the possibility of a cut should stimulate activity in the housing market.

CommSec chief economist Craig James said the supply of new housing was starting to rise, which would lead to softer price growth, but a major slump was unlikely.

“Sydney home prices have just been playing catch-up. Over the last decade Sydney home prices have risen by just 3.6 per cent on average per year, the second lowest of the capital cities,” he said.

CoreLogic RP Data head of research Tim Lawless said he expected Sydney and Melbourne’s strong growth to soften in 2015, Brisbane property prices to outperform the other capitals, modest growth in Adelaide and Hobart, and a potential fall in Perth home values.


A report this month by Colliers International said commercial property investment accelerated in 2014, and 2015 would be more of the same with improving demand from tenants.

“The majority of sales are now to Australian investors. This is not surprising given that Australian investors are now recognised as the most confident in the world,” said John Kenny, Colliers International’s chief executive for Australia & New Zealand.

AMP Capital head of real estate capital Tim Nation was also positive. “The fundamentals for office and retail markets in Australia are looking more positive than 12 months ago, with the Sydney and Melbourne office markets having seemingly bottomed and green shoots now evident, and retail sales improving nationally,” he said.

“For both offices and shopping centres, creating places that people want to visit will be increasingly important for the real estate market in 2015 and beyond.”


Property trusts, now widely known as real estate investment trusts, have delivered investment growth of 23 per cent in the past 12 months, but several of the main players are still way below their value before they got smashed in the global financial crisis.

These stocks own everything from hotels to shopping centres to Bunnings warehouses, but their strong gains in the past year have prompted a few experts to warn of potential weakness ahead, although perhaps not next year.

AMP Capital forecasts investment returns in 2015 of about 9 per cent for Australian property trusts, the same as its forecast for Aussie shares but better than estimates for residential property (6 per cent) and cash (2.3 per cent).

Research group Morningstar says low interest rates mean downside risk to property prices in 2015 is unlikely.

“Listed property stocks with reliable income streams and a solid growth outlook are increasingly expensive,” it said its outlook report released on Monday.

“Westfield Group is high quality but trades at a 10 per cent premium to valuation. Our top pick is Goodman Group, trading at an 11 per cent discount to valuation.”

Originally published as How to invest in property in 2015

Posted by Anthony Keane - News Corp Australia Network on 25th December, 2014 | Comments | Trackbacks | Permalink

Lessons to learn from the year in property

"Sell in early spring, buy in late spring" is the advice given to home hunters by many Melbourne real estate agents – and it has proved utterly correct this year.

As the curtain falls on the 2014 residential property market, it's clear that Melburnians who opted to sell houses and apartments in September have done better than vendors who sold after mid-October.

Of course, A-grade properties in superior streets almost always attract competition and strong prices regardless of the time of year they are marketed. But "me-too" properties that are similar to the house or unit across the road, performed at higher levels in the first weeks of spring.

On September 14, the Domain Group reported an auction clearance rate of 77 per cent (from 667 auctioned properties). On the next weekend a clearance rate of 78 per cent was reported (from 755 reported auctions), while on the AFL Grand Final weekend on September 28, when fewer than 100 auctions were held, the clearance rate climbed to 84 per cent.

Clearance rates held up at around 76 per cent in the first half of October, but tracked down in November. There were clearances of 67 per cent on November 30 (from 926 auctioned properties), 70 per cent on December 6 (from 1063 properties) and 71 per cent on December 13 (from 1003 auctions).

What's the takeout message from this? Clearly, it's a smart move for upgraders and downsizers to sell in the first three weeks of September. They should go for a long settlement, and buy between October and December. This is when stock levels surge and vendors become anxious to seal a deal. 

There are other good times to sell property. The winter auction market was very strong this year. Changeover buyers, intending to buy and sell next spring, should look at the pros and cons of selling in June, July or August.

Likewise, home owners planning a move in April or May of 2015 may get a stronger price by selling in the second half of February. There is always a bit of pep in February's residential market – a lot of buyers search for properties at this time. After all, the market has been in in lock-down mode since December.      

The auction market was strong and steady this year. Even so, house buyers purchasing in the most popular price brackets have applied pressure to vendors and have had room to move. They've been able to walk away from properties seen as over-priced and to peg back prices growth.

Some agents in the inner suburbs have said they are "not happy" with the prices achieved for houses in the $1 million to $1.8 million range in 2014. This is the best-supplied segment of the inner Melbourne house market – and the most competitive.

Similarly, agents in the middle-ring suburbs have seen plentiful stock and some downward pressure on prices for houses quoted between $600,000 and $800,000.

The 2014 market kicked off 11 months ago with the Reserve Bank giving a clear sign it planned to keep interest rates on hold. RBA governor Glenn Stevens said at the time "the most prudent course is likely to be a period of stability in interest rates."

The stable rates scene worked to motivate prospective vendors who had been holding back from listing because they expected rates to fall further. This helped to increase the number of residential property transactions in 2014, with sales activity in Melbourne lifting modestly compared to 2012 and 2013.

Now that economists and some RBA officials are canvassing further rate cuts in the first half of 2015, next year's market promises to be an exciting ride.

Posted by Chris Tolhurst - The Age on 19th December, 2014 | Comments | Trackbacks | Permalink

Secure the property of your dreams

No matter whether you’re buying at auction or by private treaty, the fundamentals apply: understand the market you’re buying into, get your legal documents checked and make sure your finances are pre-approved.

There are key financial, legal and logistical considerations to keep in mind at each stage of the property buying process. The steps in making a property purchase are the same whether you buy by private treaty or at auction, though the timings differ between the two.

When buying by private treaty, once you (or your agent) make an offer and the vendor (or their agent) accepts it, signs the sale contract and receives the deposit, you have ‘exchanged’ contracts and the cooling-off period begins. This period varies from state to state, but during this time you can withdraw from the sale by paying a specified penalty.

Purchases at auction have no cooling-off period. Because of this, contracts and inspection reports will be prepared by the vendor and made available to potential buyers before the auction. You may be able to organise your own building inspections prior to the auction.

Once the cooling-off period is over or you have bought at auction, you then enter the ‘settlement’ phase. This is usually when building, pest and other legal checks take place, so make sure your contract has provisions to cover any unfavourable reports or conditions they may uncover. The sale is ‘completed’ when, at the end of the settlement period, the remainder of the price is paid and the deeds are given to the buyer.

Buying by private treaty

Most Australians buy their properties by private treaty. The vendor sets an asking price and potential buyers are free to negotiate, either directly with the vendor or through an agent the vendor has appointed to handle the sale.

Private treaty sales are preferred by many as they can feel less risky than getting into an emotion-laden bidding war at auction. However, it’s still important to keep your wits about you and proceed carefully at all stages of a purchase. Here are our top tips:
  • Know your market. As always, it’s vital to understand prices in the area you’re looking at so you can make a realistic offer (relative to your finances and the local market).
  • Have your finances ready. Once your offer has been accepted, you want to move quickly to exchanging contracts, so get your finances pre-approved.
  • Don’t get gazumped. Until contracts are exchanged, your vendor can still accept a better offer after accepting yours, so get your building and pest inspections done quickly to avoid being beaten to the punch.
Bidding at auction

Auctions have the advantage of being final on the day, so you don’t need to worry about being gazumped. You do need to worry about over-committing in the heat of the moment, however, as your bid is binding and there’s no cooling-off period. As always, doing your research and having your finances pre-approved will be a great help, as will sticking religiously to your budget. It’s also helpful to attend a couple of auctions just to get a feel for what goes on and how the bidding proceeds.

A lot of psychology is involved in bidding successfully at auctions. Here are some suggestions on how to get the best result on the day – even if ‘best result’ means walking away from a sale that would bust your budget.
  • Open strongly. Putting in a sensible first bid will tell the auctioneer and your fellow bidders that you’re serious about the property. This will help separate the speculators from the serious buyers.
  • Set a realistic budget. And don’t exceed it! Your research should give you a good indication of the property’s value, so make sure you have enough funds to play with – and be very careful about exceeding your limit. The excitement of an auction lasts for a day or two but a mortgage is a much longer commitment.
  • Remain calm. This is the most important advice of all. No matter how much you like the property, if the bidding goes past your limit you need to be able to walk away. You can always get a friend or a broker to bid on your behalf if you know you’re prone to over-excitement.
Settlement of your property purchase

Regardless of sale method, once contracts have been exchanged and the deposit paid, the settlement period begins. You and the vendor may negotiate a shorter or longer settlement period to accommodate various needs. These can include your current living arrangements, like existing leases or property ownership commitments, or concerns such as wanting to move in before or after a special event (like a holiday or anniversary).

On settlement day, you (or your chosen representative) and the seller (or the seller’s agent) will meet and finalise the sale – which includes paying the vendor the remainder of the dwelling’s price. In return, you’ll receive the dwelling’s keys and title deeds and it will finally be your home.

Now all you have to do is arrange to move in – but that’s a story for another day.

Posted by Michael Butler - Domain on 15th December, 2014 | Comments | Trackbacks | Permalink

Buying a property with your partner

Looking to buy a property with your partner but you’re not legally married? No problem – as long as you take a few precautionary steps to ensure you are both protected under the law.

When it comes to property, the law has different rules for married and unmarried couples. There are courts and legislation set up to deal with marital assets, but for unmarried couples, the situation can be a lot murkier. That’s why it is essential to set up some ground rules before plunging into your exciting new purchase together. Get a co-purchase agreement

It sounds overly legalistic – asking the love of your life to sign a formal written document – but the benefits are invaluable.

A good co-purchase agreement will actually serve to protect the both of you, by setting out each person’s rights and responsibilities, as well as a dispute resolution mechanism and exit strategy in relation to the purchase.

A co-purchase agreement covers things like who will pay the bills, what if the relationship breaks down, who will reside in the house, and how can a party sell its share. Both parties know exactly what they’re getting into, and the transparency of such an agreement can only help make your relationship stronger.

TIP: Get independent legal advice to ensure your personal rights are protected. After all, a written, signed contract is your ultimate legal protection as an unmarried couple. And if you decide to get married in the future, no problem – your agreement can include a sunset date.

Joint and several liability

When buying a property, you’re most likely also taking out a mortgage together right? Be aware that most home loan agreements have a clause that makes both you and your partner jointly and severally liable to pay the mortgage in full (plus any interest or costs). This means that the bank can come after you for the whole amount of the loan (and possibly more) if your partner refuses to pay it.

So how do you protect yourself against this financial exposure? A good first step is to talk with your lawyer about indemnities and warranties that can be included in your co-purchase agreement.

Another option is to talk with your bank to see if your liability under the loan as a co-borrower can be limited. Alternatively, see if you can finance the purchase separately as tenants in common rather than joint tenants.

Tenants in common

When buying, title can be placed in your names either as joint tenants or as tenants in common. Joint tenancy is what most married couples opt for, because it gives you a right of survivorship (in other words, if your spouse dies, the whole property automatically transfers to your name). But it also makes it extremely difficult to divide and sell a share of the property – because you both effectively own the entire property.

On the other hand, a tenant in common arrangement makes it very easy to divide and sell your share of the title. This could be handy if the relationship ever turns sour and you want to get out of the property. And you can always change the title to a joint tenancy later if you wish.

Buying a property with your partner is an exciting financial venture that can bring you even closer together. Just take your time planning it – get the right documents in place and know your rights and responsibilities – and you’ll enjoy it for many years to come.

Posted by Belinda Gadd - Domain on 15th December, 2014 | Comments | Trackbacks | Permalink

What you need to know about houses and units

Buying a new home is thrilling, but are you across the ongoing costs and maintenance required?

Brilliant, you’ve found the one. You’ve paid for the prerequisite building inspections, your finances are in order and your mortgage is ready to go. Now it is time to tackle the legal fees and hefty stamp duty fees – and the property’s ongoing costs.

There are considerable differences between the ongoing financial commitments and upkeep a house demands compared to a unit.

Council rates for houses and units

All local councils in Australia charge homeowners rates to pay for local services including infrastructure and waste management. Councils set their own rates, which are charged against the value of your property. When considering a property for sale, be it a house or unit, you should evaluate the council’s levies. It’s surprising how much they differ between local governments.

House owners generally pay much higher council rates than unit owners. This is due to the fact a house owner is solely responsible for the rates charged against their property value, while unit or townhouse owners will either be charged the minimum general rate or the general rate charged against their portion of the complex, or a combination of the two. As rate calculation varies between states and local councils, it is best to check how rates are calculated in your local area.

The Valuer General is responsible for conducting property land valuations for local, state and federal government. Revaluations of your land for tax and rate purposes occur at different intervals depending on your location. For example, revaluations occur annually in South Australia, every two years in Victoria and every three years in New South Wales. If you believe your land valuation is inaccurate, resulting in higher council rates, you can contest the valuation by submitting an Objection to Valuation to your local council.

Strata management versus self-management

Owning your own house brings with it many wonderful freedoms but also responsibilities. Under Torrens title, your land and castle are your domain, and so long as council permits, you can do with it as you please. Conversely, all maintenance and upkeep fall on your shoulders.

When buying into a complex, whether it be a studio, unit or townhouse, your ownership is governed by strata title, or the lesser-known stratum or company titles. The common areas of the complex will be managed by an Owner Corporation and strata regulations will outline the owners’ rights and obligations.

It is important you look into the strata regulations and management fees associated with a complex before buying. While far less hands-on maintenance is required in owning a unit or townhouse, if you are not happy with the ongoing fees or regulations then the property will become far less appealing. Along with attending annual strata general meetings, you may want to consider becoming a member of the managing committee to have greater control over the complex’s management.

If you are buying a unit off the plan, make sure you understand the pros and cons. While you can secure a property at today’s market value with a deposit and pay the remainder upon completion of the building works, when the value is likely to have risen, there are risks. The development may fall through or unexpected building complications may occur.

House and unit home insurance costs

Houses tend to attract higher insurance premiums than units or townhouses due to their size and security requirements. That said, if you’re buying into a complex, you will need to pay strata insurance, which protects the building’s common areas, in addition to home and contents insurance.

Strategies to minimise home and contents insurance costs include:
  • Bundling policies such as car, life, health, pet and travel insurance with home and contents insurance
  • Increasing your excess to save money each month that you don’t claim
  • Protecting your no-claim status, which can save up to 65 per cent on premiums
  • Paying annually if you have the cash flow, to reduce the premium
By shopping around for a policy that best suits your needs and ensuring you don’t pay for unnecessary extras, you can cut home insurance costs from the outset. Make sure you talk to your chosen insurer about steps you can take to reduce risk and safety hazards around your home, and update the insurance company about any changes to your home and contents that may affect your premiums.

Posted by Jacqui Thompson - Domain on 15th December, 2014 | Comments | Trackbacks | Permalink

Need a reliable financial adviser? Do your homework and look online

Dodgy financial advice at the Commonwealth Bank, a weak and ineffective regulator and the government's attempts to roll back consumer protections are leaving those seeking advice in a quandary.

They must be asking themselves how they can find an adviser they can trust. A 500-plus page report by a Senate committee into the Commonwealth Bank's financial planning arm and the regulator, released last week, aired allegations of fraud, forgery and a cover-up after consumers received bad advice from some of its planners between 2003 and 2012.

The report also details how the regulator, the Australian Securities and Investments Commission, took far too long to act on tip-offs from inside the bank. It underlines how consumers have to make their own inquiries and do their homework to find an adviser they can rely on.

The minimum legal standard of advice is low. Minimum training standards are woeful. Someone can become a financial planner after completing a two- or three-week course. But perhaps the biggest problem is the product sales environment in which most planners work. 

Peter Johnston, the executive director of the Association of Independently Owned Financial Professionals, which represents about 1000 planners, says the advice market can be divided into two broad categories – planners who work for independently owned planning firms and those – the vast majority – who are aligned with one of the big financial institutions. "Independently owned advisers operate their own licence and can independently decide what products and strategies they will use," Johnston says. He says aligned advisers usually recommend their employer's products.

Claire Mackay, a certified financial planner and a chartered accountant at Quantum Financial, says consumers need to be aware of "structural bias" in much of the planning industry, where advice is linked to sales. Many people like the familiarity of a big brand and a big institution standing behind the advice, but they need to be aware they will often pay an "asset-based fee" – a fee charged as a percentage of the money under advice that is ongoing rather than paid upfront.

She says that this can mean aligned advisers may not give suggestions such as paying down the mortgage or buying an investment property because they can only capture a fee by pushing products. Many non-aligned advisers, including Mackay, ask clients to pay a fee each year for advice. She says some people baulk at paying upfront. However, it is value the client is getting for the money that counts.

Many people paying commissions and asset-based fees do not really understand how much they are paying, she says. Plus, some people with simple affairs can do a lot on their own: "Not everyone needs a financial planner but everyone needs a financial plan," she says.

There are some good tools available for those with fairly straightforward financial circumstances. A good starting point is ASIC's MoneySmart at www.moneysmart.gov.au where there is a budget planner and a mortgage calculator as well as other calculators, such as those for superannuation and retirement. You can also get simple superannuation advice over the phone. Taking steps to understand your finances puts you in a better position to find the right adviser, Mackay says. All types of business models of planning firms can have conflicts of interests.

It was, for example, mostly non-aligned advisers – receiving high commissions – who recommended investing in property developer Westpoint, which collapsed in 2007. And it was mostly accountants who recommended the tax-effective agribusiness schemes such as Great Southern and Timbercorp that collapsed in 2009.

Members of the leading planner professional association, the Financial Planning Association (FPA), follow a code of practice that is far above the legal minimum. About 5600 FPA members also hold the certified financial planner (CFP) qualification, which the association promotes as the "gold standard" of financial planning. New practitioner members of the FPA must have a relevant university degree.

Read more: http://www.theage.com.au/money/planning/need-a-reliable-financial-adviser-do-your-homework-and-look-online-20141212-1261pt.html#ixzz3M59mPFTo

Posted by John Collett - The Age on 15th December, 2014 | Comments | Trackbacks | Permalink

Housing affordability: Are foreign investors to blame for Australia’s high property prices?

 AUSTRALIANS are finding it increasingly difficult to fulfil the Great Australian Dream: To buy their own home.

Residential property prices have gone throught the roof over the past three decades, particularly in our capital cities. Prices are so expensive that everyday Aussies, especially first home buyers, are being pushed out of the property market in their droves.

One theory consistently put forward to explain the high prices is that the market has been flooded with foreign investors. They fly in with packed wallets and are willing to pay top dollar, locking out the locals.

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The federal government launched a parliamentary inquiry to look into this theory and its findings may come as a surprise.

So, are overseas buyers really to blame for Australia’s astronomically high house prices?


For starters, the inquiry agreed that house prices were getting out of control.

Combined capital city home values have increased 13.2 per cent in the 21 months to January 2014, according to real estate data company RP Data. Meanwhile, an International Monetary Fund report from last month found that the ratio of housing prices to average incomes is 31.6 per cent above the historical average in Australia.

The inquiry heard evidence from a range of sources, including members of the general public and industry experts, to explain the price hike.

Most of the concern about foreign investment came from personal submissions, while industry stakeholders tended to argue that the general population overstated the impact of overseas buyers.

Ultimately, the report concludes that there is no solid evidence to support the idea that foreign investors are driving up prices.

It acknowledges that reliable data on the issue is scarce but finds that, overall, foreign investment is good for Australia.

The report states that overseas buyers actually help to make housing more affordable because their investment boosts the economy, provides jobs and — crucially — encourages new homes to be built, increasing housing supply.

“The evidence points to a continuous lack of supply in Australia as a key driver of price increases,” the report states.

“Importantly, foreign investment is regarded by industry experts as vital to increasing this supply.

“Rather than causing price pressures, the evidence suggests that foreign investments may actually help keep prices lower by increasing supply.”   

Some contributions to the inquiry expressed concerns that overseas investors made it especially difficult for first home buyers to break into the market. But industry experts argued that foreign investors tended to buy properties that were out of the price range of local first-time buyers.

The Master Builders of Australia told the inquiry that foreign investors and first home buyers rarely competed for the same properties.

Foreigners tended to preference new, high-density, inner-city properties, often close to universities. And they tended to be valued well above the average national sales price.

Similarly, the Real Estate Industry of Australia said first home buyers favoured established real estate.

“The preference for foreign investors is at the higher end of the market, with a $1 million average for established real estate for temporary residents, and a $647,000 average for individual purchasers of new dwellings … way beyond the reach of an aspiring first home buyer,” spokeswoman Amanda Lynch told a hearing in May.

The Property Council of Australia argues that “there is no evidence that international investment is swamping the residential housing market or influencing prices”.

Exclusive Melbourne agency Nyko Property said the “noise” surrounding overseas investment was “wildly inaccurate”.

“Vision on our television networks of people of Asian appearance bidding at auctions and outbidding other Australians does, in our opinion, simply kindle xenophobia and is anathema to the long-term goal of Australian policymakers to further integrate our economy with Asia — the fastest-growing economic region in the world,” its submission stated.

The inquiry concluded that the industry experts were correct.

“The committee is also satisfied from the evidence received that foreign investment is not causing the market distortions that have been advocated in some quarters, particularly for first home buyers,” the final report states.

“This is because foreign investment levels are not large enough to do so overall because overseas buyers mainly operate at a different price bracket from first home buyers and buy different types of properties.

“The housing supply issues that have been ongoing in Australia would worsen if foreign investment was curtailed.”


● Non-resident foreign investors are not allowed to buy an existing home, but they can buy new homes

● Foreign people living in Australia for no more than 12 months can buy one existing home, but they must live in it and sell it when their visa expires

● All purchases must be screened by the Foreign Investment Review Board


Figures are limited, but the Master Builders of Australia estimate that foreign investors account for 5 to 6 per cent of the Australian housing market.

Property developer Meriton said overseas buyers represented closer to 2.5 per cent of annual sales.

Foreign Investment Review Board figures show:

● Between July 2013 and March 2014, $24.8 billion in foreign investment has been approved

● This was 44 per cent higher than the $17.2 billion approved in 2012-13

● Between July 2013 and March 2014, the FIRB approved the purchase of 5755 existing properties

● In 2012-13, this figure was 5101

● Most of the investment is in Sydney and Melbourne

According to the Property Council of Australia, “There is simply not enough foreign investment to skew the residential market as a whole”.


There is no one explanation, but a lack of housing supply is the most commonly cited reason for high property prices.

Other factors that the report notes have a larger impact on prices than foreign investment include:

● Strong population growth and higher per capita incomes

● Australians’ ability to take out larger mortgages due to greater access to cheap credit

● The scarce availability and high cost of land to develop

● Low interest rates

● The strength of the economy

● State and local planning regulations and red tape

● Stamp duty and tax arrangements

Financial adviser SMATS Group said Australia’s population growth had increased demand.

“The general community does not fully appreciate that the main driving force in property price increases is Australia’s growing population, which rose 1.8 per cent to the year 30th September 2013,” the company states in its submission.

“This equates to an additional 405,400 people and places enormous pressure in the property market for homes to accommodate this rising tide.”

The Reserve Bank of Australia argues that our historically low interest rates have increased the attractiveness of investing in “riskier, higher-yielding assets, resulting in strong demand for residential property”.

The Real Estate Institute of Australia argues, “Addressing housing supply would avoid any future questioning about impact of foreign investors in residential real estate”.

The Property Council of Australia said Australians were being priced out of the market by other Australians.


The report acknowledges, however, that foreign investors may have an impact in pockets of the market.

“At the margin, foreign purchases may be pushing up prices in particular segments of the market, such as high-quality new apartments in Sydney, Melbourne and the Gold Coast. However, even these markets are dominated by local purchasers,” Meriton states in its submission.

Christopher Kent of Reserve Bank said it was “hard to deny” that foreign investors were having some impact.

“If you imagine an auction on a weekend where you throw in an extra buyer who is willing to pay a little bit more than everyone else there, if that buyer happens to be foreign, maybe as a temporary resident, and they are buying a single play that they are able to get approval for, it is hard to deny that it would not push up the price,” he told a public hearing in June.

While the report concludes that foreign investment is good for Australia, it did find that the rules surrounding overseas buyers were not enforced or policed properly.

It also noted that there was no accurate or timely data that tracks foreign investment.

It recommends introducing a penalty regime to punish those who breach the regulations, including third parties that knowingly help investors to break the rules.

It also recommends setting up a national register to record the citizenship and residency of all home buyers.     

Committee chairwoman Kelly O’Dwyer said the foreign investment rules were sufficient but their application was “severely lacking”.

“I regard the current internal processes at the Treasury and FIRB (Foreign Investment Review Board) as a systems failure,” Ms O’Dwyer said.

“Most concerning is that sanctions seem to be virtually non-existent.”

The report found that there had been no prosecutions for breaching foreign investment rules since 2006 and no orders to sell off properties bought by breaking the rules since 2007.

“It defies belief that there has been universal compliance with the foreign investment framework … since 2007,” the report states.

Ms O’Dwyer suggested that there were investors breaking the rules, but that they had slipped through the regulatory cracks.

“Suggestions by officials that (the lack of prosecutions) is due to complete compliance with the rules is simply not credible,” she said.

“Australians must have confidence that the rules, including those that apply to existing homes, are being enforced. Our inquiry revealed that, as it stands today, they could not have that confidence.”

Posted by News Limited Network on 13th December, 2014 | Comments | Trackbacks | Permalink

Size matters when it comes to defaulting

Australian borrowers are a fortunate bunch. Unlike households overseas, they've managed to avoid the wave of painful mortgage defaults that have brought other economies to their knees.

Indeed, local banks say the share of people falling behind on their mortgage payments is at historic lows.

Yet history suggests things will not stay like this forever. Bad housing loans will increase one day, and bankers say that many of the loans that will go bad are probably being written now, when interest rates are so low. 

So, which borrowers are most likely to fall behind on their mortgage payments?

The Reserve Bank recently published some useful information on who is at most risk of falling more than 90 days behind on their mortgage. The findings are worth keeping in mind, especially if you're someone who might be at higher risk.

The RBA concluded that the size of the debt you are taking on makes a big difference, especially the proportion of the property purchase funded with borrowed money. This is known as the loan-to-valuation ratio (LVR).

If you take out a loan with an LVR of 90 per cent or more, the likelihood of missing a payment is three and a half times greater than for a loan with an LVR of 60 per cent or less, and almost twice as great as for loans with LVRs of 80 per cent to 90 per cent. 

That's why banks generally force anyone with an LVR of 80 per cent or more to take out mortgage insurance – something that can add thousands of dollars to the cost of a loan.

The important thing to remember is that mortgage insurance protects the bank from default, not the borrower.

But it's not only the loan size that matters – there are other potential risks to be aware of.

Borrowers who pay higher interest rates are also more likely to fall behind. If there are two identical loans and one has an interest rate that is 1 percentage point higher, that borrower is about 1.4 times more likely to fall behind, the RBA said.

People who always pay off their credit card in full each month are also less likely to fall behind on their mortgage.

And low-documentation loans – where the bank does less checking of the borrower's financial situation – are more likely to go bad.

What's the bottom line, then? 

For one, size matters a great deal with a loan. It's important not to borrow more than you can comfortably service, especially as interest rates will inevitably rise one day. 

The research also suggest that it's worth being extra cautious with your mortgage payments if you are someone who has a high LVR loan, has a low-doc loan or has let their credit card debt pile up.

Read more: http://www.theage.com.au/money/borrowing/size-matters-when-it-comes-to-defaulting-20141205-11yfw4.html#ixzz3LiIEHuyO

Posted by Clancy Yeates - The Age on 10th December, 2014 | Comments | Trackbacks | Permalink

Financial regulators united in attack on risky loans

Australia's financial regulators have launched a joint attack on risky home lending as investment and interest-only loans threaten the stability of the financial system.  

The Australian Prudential Regulation Authority called an emergency meeting with the nation's banks to tell them of new speed limits that will prevent them from aggressively pursuing investment property borrowers.

At the same time, the Australian Securities and Investment Commission said it would investigate interest-only loans, which make borrowers highly sensitive to movements in interest rates. 

The move could put the brakes on the rampant property markets in Sydney and Melbourne, which have seen house prices rise at a double-digit pace fuelled in part by demand for investment loans. 

The investigation will probe the banks, including the big four, as well as non-bank lenders and their behaviour as the property market heats up, the Australian Securities and Investments Commission said. 

"The review follows concerns by regulators about higher-risk lending, following strong house price growth in Sydney and Melbourne," it said. 

ASIC, the Australian Prudential Regulation Authority, the Reserve Bank of Australia and the Treasury were working together on the investigation, which will "monitor, assess and respond to risks in the housing market", ASIC said.

They will co-ordinate their investigation through the Council of Financial Regulators. 

ASIC said on Friday that interest-only loans as a percentage of new housing loan approvals by banks had reached a new high of 42.5 per cent in the September quarter. 

This included owner-occupied and investment loans. 

"While house prices have been experiencing growth in many parts of Australia, it remains critical that lenders are not putting consumers into unsuitable loans that could see them end up with unsustainable levels of debt," ASIC deputy chairman Peter Kell said.

"Compliance with responsible lending laws is a key focus for ASIC. If our review identifies lenders' conduct has fallen short, we will take appropriate enforcement action."

In a separate statement, APRA revealed it had written to all of the banks, asking them to set out plans to reinforce sound residential mortgage lending practices. 

"In the context of historically low interest rates, high levels of household debt, strong competition in the housing market and accelerating credit growth, APRA has indicated it will be further increasing the level of supervisory oversight on mortgage lending in the period ahead," it said. 

It said it was not yet necessary to introduce across-the-board increases in capital requirements, or caps on particular types of loans. 

"These steps represent a dialling up in the intensity of APRA's supervision,"  APRA chairman Wayne Byres said.

"There are other steps open to APRA, should risks intensify or lending standards weaken and, in conjunction with other members of the Council of Financial Regulators, we will continue to keep these under active review."

The banking regulator flagged last month it was mulling action to stop the housing market from overheating, voicing particular concerns about the jump in the number of owner-occupiers taking out interest-only loans. 

Steven Münchenberg, chief executive of the Australian Bankers' Association, which represents the big four banks, said: "Lending into housing markets has been a regulatory focus for some time and we are confident that banks have been maintaining appropriate lending standards."

A spokesman for the National Australia Bank said it would "work co-operatively with the regulators to ensure ongoing prudent lending practices".

"NAB has a well-defined approach to our risk settings and regularly engage in a range of stress tests that examine the portfolio against a number of economic scenarios, including declines in the property market, rising unemployment or changes in interest rates.

"NAB assesses every customer on a case-by-case basis and looks at a range of factors such as their ability to manage debt, today and into the future, before providing loan approval."

Read more: http://www.smh.com.au/business/banking-and-finance/financial-regulators-united-in-attack-on-risky-loans-20141209-123jjx.html#ixzz3LQgjaMzK

Posted by Georgia Wilkins and Nassim Khadem - The Age on 10th December, 2014 | Comments | Trackbacks | Permalink

What Murray means for you and your wealth

All you need to know about David Murray's report on the financial system is that it would ban borrowings by DIY super funds and hit bank dividends.

There, that'll spare you 290 pages you were going to read on the beach over the holidays.

Oddly, for all its visionary reforms it's hard to nail down exactly what they are. It reads more like a policy speech, directed only at politicians.

So new capital controls on the banks, which judging by Murray's comment about their "very high payout ratios" he expects will be paid for with less generous dividends, along with maybe a tiny increase in mortgage rates, are for the Australian Prudential Regulation Authority (APRA) to sort out.

Tax changes are for the government's white paper next year to look at.

And even the lower super fees it proudly boasts require a Productivity Commission inquiry once MySuper is bedded down after mid-2017.

What's more the super reforms won't happen, says Joe Hockey, unless they get bipartisan support even though they would add 25 to 40 per cent to the retirement income of somebody on the average wage.

That rules out one of the few specific recommendations which is to exclude super from industrial awards where union and company-run funds have a privileged position as front runners to be the default fund.

Unfortunately, Murray doesn't itemise which reform will deliver how much to super balances except that a footnote reveals a 15 to 30 per cent increase would come from encouraging more annuities to be taken out by retirees.

Tax impediments would be removed – another one for next year's white paper – and funds would have to put a bit more time and effort into designing a "comprehensive income product for retirement" which would be part account-based pension and part annuity.

They'll also have to give you regular projections of your likely retirement income rather than the balance.

Funnily enough, having been offered one of those products you don't have to sign up for it anyway though I guess then you'd be denying yourself another 15 to 30 per cent extra income in retirement. Don't say you weren't warned.

That leaves the remaining 10 per cent gain in retirement incomes. It comes from falling fees as low-cost MySuper, the default fund in awards which Murray wants to abolish, is implemented by mid-2017. If fees don't fall much the report recommends fund managers compete in an auction run by the government to win the default prize.

Now, what was that about a ban on future borrowings by DIY funds? Well, Murray talked about "direct borrowing" so it's not altogether clear whether that would include popular instalment warrants. I can't imagine he'd countenance borrowing for shares which can be done clandestinely through warrants and geared managed funds, while ruling out an upfront loan for a property.

Still, it's academic. There's no date when it would apply, it would be grandfathered in any case, and needs bipartisan support.

If you ask me, the big deal for DIY super funds, most of which are stuffed to the eyeballs with high-yielding bank shares is what's going to happen to the dividends on them.

The market decided the day after the report was released that the banks weren't such big losers from Murray after all. But can it be so sure?

The report was vague about how much capital they should hold, apart from hinting the ratio is at least 1 per cent lower than it should be, and that it's up to APRA and the central bank bureaucrats in Basel to work it out.

I'll bet this has gone down a treat with foreign investors who worry that our banks are overexposed to property.

It also wants the big banks to set aside extra capital for each home loan. This would be counted toward the capital ratio and makes the smaller banks more competitive because they've always had to put a lot more aside.

So why is the market marking down the small banks?

Because they were short-changed. It had been thought the amount they have to set aside on each mortgage would fall, but instead it was lifted for the big banks, and then only to 25 to 30 per cent, not the 35 per cent they face.

Worse, it's not just the big banks facing a higher overall capital requirement. The small ones will too, and capital is harder for them to generate.

Posted by David Potts - Money Manager on 10th December, 2014 | Comments | Trackbacks | Permalink

7 traps to avoid when buying property through SMSF

Let me guess. You’ve been secretly toying with the idea of setting up your self-managed super fund (SMSF) to ramp up your retirement. You realised with horror that unless you do something about your superannuation, you may not have enough money to live on in your old age.

As you listen to your friends and colleagues go on about how setting up your own SMSF is the Holy Grail of retiring richer, you’re convinced you should do it too.

After all, if millions of Australians are already doing it, they must be clearly benefiting from it.

Read more: Tips for buying property with your SMSF

Low tax

One of the most attractive features of investing within your SMSF is the fact that any income you derive within your super enjoys a low tax rate of just 15%.

Even better is the capital gains tax discount. Properties that have been held by the SMSF for at least 12 months and are sold will only attract a 10% tax.

If you bought outside your SMSF, you would have to pay tax on 50% of the capital gains using your marginal tax rate, which could be as high as 49%.

The best tax deal, however, comes when you reach pension age, then all the income you get from your SMSF investments or capital gain will be tax-free.

But there are a few gotchas. 7 things to know about setting up your SMSF & buying property

1. It’s expensive to set up an SMSF

As a rough guide, it costs about $2,000 to set up a new SMSF.

2. It’s expensive to maintain an SMSF

Because it’s regulated, every SMSF is audited for compliance. This could set you back anywhere between $500 and $1,000 pa.

3. You need substantial funds in your super

Due to the high cost of set up and maintenance, you need to have at least $200,000 in your super, as a rule of thumb, to be able to buy quality properties.

4. Borrowing through your SMSF is more complicated

Be prepared to provide a lot more documentation when borrowing to invest within your super. You also need to give personal guarantee, which means you are still liable to pay for the debts of your SMSF.

5. The amount you can borrow is usually much lower

Banks generally cap their lending at 65% of the value of the property although the competition has ramped up among lenders and some are offering up to 80% of the value of the property. However, they still require you to show a healthy buffer.

6. You cannot renovate the property

The property you buy within the SMSF should be tenant-ready and the law prohibits you from doing major renovations to improve the value of the property.

7. You cannot buy from a related party & family cannot inhabit the property

It is against the law to buy an asset, including property, from a related party. All investments must be strictly at arm’s length. Families and relatives are also strictly prohibited from renting the investment property bought within the super fund. This is to ensure the transaction is made purely on a commercial basis and avoids potential conflicts of interest.

As you can see, setting up your SMSF can be a good way to build your retirement fund, if you do it right. Make sure you speak to a qualified professional person before jumping in, however, as the consequences can be costly.

The information in this article is for general interest and is not intended as advice. For advice and planning, consult an experienced financial consultant.

Posted by Nila Sweeney - realestate.com.au on 10th December, 2014 | Comments | Trackbacks | Permalink

Homebuyers warned lower interest rates won't be 'new normal'

Australia's most watched chief economist has joined Goldman-Sachs and Deutsche Bank in tipping a cash rate cut from the Reserve Bank, but analysts are warning first home buyers of thinking low rates are the new normal.

Westpac's Bill Evans made the call on Thursday that the Reserve Bank would need to cut the cash rate by 0.5 percentage points in the months after Christmas, in order to bolster domestic demand and pull the Australian dollar lower.

He said he expected the RBA to cut rates by 25 basis points (a quarter of a percentage point) in February and again in March prior to another period of stability.

On Monday, analysts said that the Australian dollar would need to fall substantially in order to take the pressure off the RBA to cut rates in the new year

But while lower interest rates might be good news for homebuyers, Rate City product director Peter Arnold said the big danger was assuming lower rates would become the norm.

"Historically speaking we're far from normal. The general talk is that rates will stay low for a long time, but a home loan is around for an even longer time," he said.

"Even if rates stay low for five years, no one pays off a mortgage in five years. It's very important first home buyers don't factor their overall borrowing amount on current repayments."

Mr Arnold said homeowners on a variable rate loan would no doubt benefit from a rate cut, and that even before the RBA had made a move he was observing "more trimming" of variable rates than normal.

The average variable mortgage rate for December is 5.34 per cent, down from 5.37 per cent in October.

December's average fixed rate loans for one, three and five years, were 4.76 per cent, 4.96 per cent and 5.20 per cent respectively, according to data from Rate City.

Mr Arnold said longer-term fixed rates had come down quite a lot in recent years, while shorter-term fixed rates were unlikely to come down much more.

"The average in five-year fixed rates has come down by over 50 basis points, which is a big change. That can mean two things. Either that the banks think there will be rate cuts, or they think there will be a longer time before the rate rises than previously thought."

The position of current average fixed rates suggests the expectation of where rates are going to go over the mid term has definitely changed, he said.

JP Morgan economist Ben Jarman also said that consumers believing low rates were the norm would be a big concern for the RBA.

"Their chief argument has been that it's not interest rates that are the problem, it's a lack of what the governor is calling 'animal spirit'; a lack of willingness for people to use those low interest rates to undertake productive investment," he said.

Mr Jarman said while the RBA has cut rates, the most obvious lines of traction have been in housing and not in the areas that are more important for creating investment and jobs.

"That's their difficulty, they can't control how low interest rates express themselves. The longer they stay down here at these levels the more that gets entrenched as the norm in people's minds," he said.

Mr Jarman said he did not share Mr Evans' expectations of a cash rate cut by February, but rather felt that the RBA would remain on hold through 2015.

"It wasn't that long ago that people were talking about the prospect of near term rate hikes because of the housing market, and we were definitely pushing back against that," he said.

"I think the judgment call here is about what the RBA's reaction function is, if you like. What's the willingness to try to pump up growth a bit more?"

Typically, that judgment would be determined by the RBA's view on inflation, currently at 2.3 per cent.

"It's pretty low. If we start to get a sense that it looks like it could be low for a sustained period, then you could see how they might have to change their tune in the new year. But for right now I think it's a bit preliminary to make that call."

Read more: http://www.smh.com.au/business/the-economy/homebuyers-warned-lower-interest-rates-wont-be-new-normal-20141208-1216pk.html#ixzz3LQfqOu2I

Posted by Lucy Cormack - The Age on 9th December, 2014 | Comments | Trackbacks | Permalink

Celebrate too soon and you'll blow it

I love sport. I love playing it and I generally love watching it. I publicly confess to brushing aside a sneaky tear during big moments such as Cathy Freeman's 400-metre win, Sally Pearson's hurdle victories and the Australian netballers' triumphant celebrations over our Kiwi rivals.

There is just something about an elite athlete training hard, overcoming injury and then mentally pushing through any obstacles to win. It's also perhaps why I love football movies of any kind. And yes, a sneaky tear embarrassingly escapes during these occasionally too.

What I do know through my many years of playing sport, from listening to athletes or reading about them, is that training, eating well, a great mindset and the right coach play such a big part, but at the end of the day it's what happens on the field or the track that will lose or win a race or a game. And often that comes down to what happens at the very end. 

Whether it's the last few kilometres in a marathon, the last quarter of a game or the split second over a finish line it is so important to finish well. Otherwise you could have trained wonderfully, eaten well, had a great mindset going into the game and performed beautifully but in those final minutes if you don't end well then really it's all for nothing.

I mean, can you imagine Sally Pearson arriving at the last hurdle and deciding it was simply too high and too hard? Or Cathy Freeman running the last hundred metres and deciding it hurt too much? Or Jessica Fox lying down in her kayak at the final gate because she's too worn out?

Now I'm sure they were all incredibly tired and they would have loved the opportunity to stop, but it was more important to finish well and to give their all. Yet stopping and having a lie down before we arrive at the finishing line is precisely what many of us are doing with our finances this time of year.

Let's say you've had a fairly good year. You've worked out goals, you've put in place budgets, you've tracked spending, you've paid off your credit card debts and you might have a savings buffer in your accounts. Fantastic!

So you arrive at December or at the Boxing Day sales and you decide to reward yourself for having had an outstanding year. Or you decide to splurge a little extra on Christmas this year, because you can. And somehow that splurging and shopping and spending ends up undoing all the great work from your year and you end up feeling defeated and slipping back into a whole lot of bad habits.

That's like running a great race but then stopping at the last hurdle.

Now I love a good sale and buying presents for others, so I'm certainly not advocating that you sit at home, do nothing, buy nothing and act like the Grinch. However I am suggesting that you make sure you are conscious of your spending this holiday season and you put plans in place to make sure you enjoy it both now and when your credit card statement arrives in late January.

What I know from watching and playing sport is that athletes always go into a race or a game with a strategy. And generally that strategy encompasses the moment they start the race to the moment they finish. That's because they understand the mental toughness it takes to finish a race well or to win a game.

So my question to you as we reach the final moments in this year is what financial strategies are you going to put in place to make sure you end your race well?

Perhaps your strategy will include writing down every person you're buying for and keeping track of how much you're spending using free apps such as Evernote or Santa's Bag. Perhaps it's working out how much you're going to spend over the Boxing Day and January sales and then tracking it using the MoneySmart app or Xero to make sure you stick to your limit.

Or perhaps it's about simply buying everything online so you're not tempted to purchase more as you walk past something shiny at the shops. Whatever you do, make sure you have a plan to finish well.

The most incredible moments in sport often happen at the end of the race. The elation on the face of the winner, the embraces of team-mates winning a grand final or the marathon runner who has finished miles behind everyone else but still stumbles over the finishing line determined to finish to a standing ovation from the crowd.

Whether you feel like you've won your financial race this year or you're stumbling broken over the finish line, why not choose today to finish this year well and put half an hour aside this week to create a strategy so that you do.

Then make sure you celebrate your financial victory over a glass of bubbles, a cider or a green smoothie on New Year's Eve and acknowledge the fact that no matter what type of year you had, at least you chose to finish well.

Posted by Melissa Browne - Money Manager on 5th December, 2014 | Comments | Trackbacks | Permalink

Big mortgages claiming scary bite out of household income

If you thought the global financial crisis had killed off Australians' penchant for taking out big mortgages, think again

Household indebtedness is back near record highs, after only a brief slowdown between 2008 and 2012.

The ratio of household debt to income is 151 per cent, the highest since March 2008 and just below its all-time peak of 153 per cent, latest figures from the Reserve Bank show.

As the graph shows, this measure has tripled since the early 1990s, despite the short interruption from the global financial crisis.

Our debt levels are also higher than those of most other developed countries, many of which have suffered housing busts.

So it's hardly surprising that investors overseas often worry about this high debt load, and how borrowers would cope if they were hit by an economic shock or a sharp rise in interest rates.

The Reserve Bank has also been giving borrowers some not-so-subtle hints that it does not want to see borrowers take on too much more debt, most of which is used for buying houses.

It's their job to worry about these things, but the central bank has a good point. 

Despite record low interest rates, the RBA says the likely burden of meeting loan repayments was at about its 10-year average.

In NSW and Victoria, it said the share of household income needed to pay the interest on an average loan over the next 10 years was already near "historical highs".

In other words, average households in the two biggest states are already directing plenty of their budgets towards paying interest on their loans.

As a result, many economists reckon average household debt compared with income is probably close to its limit - because people would struggle to afford to carry too much more.

All the same, there remains the risk of borrowers overcommitting, especially when interest rates are at their very low current levels and there is hot competition in the property market.

With mortgage rates below five per cent, it's important to make sure you would not be caught out if interest rates rise, something you can test using the MoneySmart online mortgage repayment calculator.

To save us from ourselves, the financial regulators are also looking to introduce new restrictions on bank lending for property purchases. This is what the clumsily-named "macroprudential policies" are designed to do.

It's most likely that these new rules will make it more expensive for banks to lend to property investors, rather than first home buyers or other owner-occupiers.

There is also a chance banks will be told to be more rigorous when they are assessing whether borrowers can afford the debt they are taking on.

If you're someone who's taking out a loan, it's all the more reason to make sure you'd be prepared if interest rates were to rise - something that's bound to happen eventually.

Read more: http://www.theage.com.au/money/borrowing/big-mortgages-claiming-scary-bite-out-of-household-income-20141127-11um84.html#ixzz3LQfFH71a

Posted by Clancy Yeates - The Age on 3rd December, 2014 | Comments | Trackbacks | Permalink

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