Prime Minister John Howard said this week, “What is happening in the United States is a reminder that you cannot take economic prosperity for granted.” So true – his comment mirrors the exact sentiment when our economy floundered in the “recession we had to have”. Many have suggested this week that our mentality to money is in timely need of an uppercut, given our propensity to spend where a greater concern is that many are reliant on other people’s money. This was further evidenced earlier this week when the Reserve Bank took the extraordinary step of dismissing rumours that arrangements had been made to bail out Adelaide Bank with emergency funding. As global financial markets problems continue, last week we saw ANZ raise margin lending rates and this week the Commonwealth Bank followed suit. The international cost of other people’s money is climbing which is exactly why investors are hedging their bets where today, their greatest concern is the alarming lack of transparency. Continue reading »

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Freeze frame – Australian businesses (not to be confused with governments) continue to report vibrant trading conditions. Throw in record profits, confident forecasts and all time low unemployment. Why the consistent reporting about housing affordability? Businesses are run by business-minded people. When governments with little business acumen, intervene by way of taxes, we begin to see the answers to the problem. Put simply, lack of ability.
Take the introduction of GST as a classic example whereby since its introduction in 2000 the platform of reduced taxes has only seen taxes increase. Since the introduction of GST, tax payers have been ripped off big-time. In NSW, (just one example) Stamp Duty since the introduction of GST has seen the rate increase from five (5) per cent to seven (7) per cent for a residential property acquisition in excess of $3,000,000. The introduction of GST has identified itself as the scam of the century – the perfect 10 for governments. Continue reading »

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With an economy that has now posted seventeen years of growth, politicians will tell all and sundry that everything is hunky-dory. Not so! The national average for Australians servicing mortgages is now 36.2 per cent (and climbing) of their income. No doubt the nine interest rate increases over the last five years play a pivotal role in these growing household debt ratios. It is not however, the Reserve Bank of Australia’s (RBA’s) warnings that cause the greatest concerns. Continue reading »

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Many may not be aware that the next week will reveal just how strong the property markets are as the first run of properties is presented to the market place. This will determine just how hot our property markets are and by all reports and agent indications, it will be extremely hot! So much so that in the coming weeks the Mosman market should record high prices if the auction results posted this week are anything to go by. How long this will last is anybody’s guess however concerns over interest rates and the US economy appear to have little to no effect with market sentiments. The graphs below from www.domain.com.au identify many interesting scenarios. Continue reading »

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What a difference a week makes. This time last week, we were left pondering “seismic shifts” to the world financial markets. We then saw Australian shares jump 4.6 per cent last Monday, to record the biggest one day jump in nearly a decade. Yes, the US Federal Reserve injected some financial Viagra into their markets which then resonated across the globe and left many journalists eating a considerable amount of humble pie. The next time we see a correction, the proven method of taking three deep breaths, would be a much smarter approach. The flow on effect of sub-prime (high risk) debt in Australia, has now been estimated at approximately 1 per cent exposure which now brings the mountain back to a mole hill. Continue reading »

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We are witnessing fascinating times with the vast majority of stock market investors now opting to baby-sit their wealth for the time being. I believe that these funds will sit stagnant in bank accounts for the short term whilst this state of confusion attempts to remedy itself. There is always panic at the beginning then, after taking three deep breaths, the worst case scenarios more often than not fail to become a reality. For those carrying high debt ratios, this is not an opportune time to be taking calls from bank managers as banks will most definitely be heading in the direction of debt-reduction mode over coming months. Last weekend the newspapers were hardcore following Friday’s share market investor departures although the reporting actually had no effect on the property market’s performance. The Sydney auction clearance rate strengthened over the weekend posting a 68.5 per cent clearance of public auction properties which was up on the previous week’s clearance rate of 64.7 per cent. It will be most interesting to see if we get an over- supply of property in coming weeks (which I seriously doubt) given that our markets enjoy strong followings that have continued to post positive results. Continue reading »

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Week after week we hear that residential real estate is too expensive and the dream of owning a home is no longer a reality for some. Then throw in an interest rate increase and revelations that in many areas property prices will fall. Hello – we all know that the cash rate target is not fixed. We also know that each month economists debate the likelihood of further increases or decreases (the last being -0.25 on December 5, 2001). So it should not come as a significant shock that that we have had nine increases over the last six years. It would also be fair to suggest that the majority of home owners have done exceptionally well from real real estate over the last six years – one should remember to never let the facts get in the way of a good story. Continue reading »

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A second guest article by architect Peter Tout of Castlepeake , as Robert continues his holiday.

The Brief – Virtually the single most important part of the design process. Balance the need to inspire and excite a creative mind with establishing clearly identifiable limits and boundaries. Write a concise two pages, the first noting your physical requirements of the house , the second the more hard to define emotional and aesthetic vision. Continue reading »

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In another guest article Peter Tout of Castlepeake and Sustainable Harvest Gro, offers a different perspective to Robert, who is on holidays.

Public awareness grows daily of the need to conserve our precious resources of water and energy. After more than a year of advertising and developing our new water and solar businesses we are sorry to say that the worst take up of our offer to the Sydney market is in Mosman and Woollahra municipalities, the two richest, best educated areas in Sydney. Why is this so? We have our theories that we will leave for another day, but what follows is a short summary of what you can do in your Mosman house to contribute to the solution to our water and energy woes.

We must accept that Sydney has to move to a situation where clean fresh drinking water from Warragamba Dam is used for that purpose only, drinking and washing. All other water uses in our lives including gardening, washing cars, flushing toilets, industrial uses, irrigation, air conditioning and cooling towers must be from harvested rainwater falling free from the sky or recycled water. We then would not have a water crisis in Australia.

So here are the suggestions:

Collect the free rainwater that lands on your roof (one metre of water a year ), store it and then use it to water the garden, top up the pool, wash your car and flush the toilets.

Replace your old inefficient and energy guzzling electric hot water system with a brand new evacuated tube solar hot water system, save many hundreds of dollars a year in water heating bills and qualify for a Federal Government rebate of $1000.

Add photovoltaic cells to your roof to generate your own electricity and bank the federal governments $8,000 rebate. This single measure is far more significant than John Howard has been given credit for. I have done it and I can tell you the feeling of pride it gives you reading your little digital metre in the kitchen showing how much power you have generated in a day is amazing.

Replace your gas fired pool heater with an evacuated tube pool solar pool heating system to heat your pool for next to nothing. Reduce the hours your pool filter runs in the cooler months. The colder water needs far less filtering, I have done it and the savings are significant.

Do an audit of all your electrical appliances. You will be amazed at the power consumed by them all on standby mode at 2.00am in the morning. Find ways to turn them all off before you go to bed, your savings in your electricity bill will amaze you.

Reduce water consumption in your garden. Most gardens and plants in Mosman need far less irrigation than they get from automated irrigation systems, especially in the cooler months. Remember Mosman gets one metre of rain per annum, even during the drought.

Reduce your lighting load. Mosman houses, lit up like Christmas trees at night, with vast numbers of halogen lights left on, consume vast amounts of energy. Use the dimmers, turn lights off. The new range of compact fluros and LED lights, whilst not perfected yet, will soon see the end of incandescent lights and halogen lighting and vastly reduced household energy consumption.

Turn off your air conditioning, and if building new, insist on not putting it in. Nothing consumes more energy in a house that a reverse cycle air conditioning system. I’ve said it many times before and I’ll say it again, a well designed and insulated and cross ventilated house in Mosman does not need air conditioning on the ground floor living areas, it may only need it, on 10 – 15 nights a year, in the second floor bedrooms.

Implement even some of these measures and do your bit to leave this planet in better shape for our children.

For more information on these suggestions contact :

ptout@castlepeake.com.au or look at the following web sites: www.sustainableharvest.com.au or www.waterharvest.com.au or www.solarharvest.com.au or www.castlepeake.com.au

Peter Tout

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Most interesting to read in The Sydney Morning Herald on July 18, 2007 an article by Tony Abbott “The ‘me too’ chorus says Government’s got it right”. “By most criteria, the Howard Government has been the best since Menzies.

Unemployment, interest rates and inflation are at 30 – year lows. There is virtually no foreign debt. Australian’s real net wealth per head has doubled since 1996 and real wages have increased by 20 per cent. Contrary to mythology, the richest and poorest deciles have increased their disposable income at about the same rate since 1996, with the biggest percentage gains going to middle- income families. Almost 80 per cent of Australian families are buying their own homes, an all-time record.”

Yet this week, a Federal parliamentary economics committee has been set up to investigate declining credit standards and rising mortgage defaults. The Housing Industry Association’s (HIA’s) national outlook for the June quarter is that record low housing affordability is stopping a growing number of Australians from actually owning their own home. Personal bankruptcies are up 17 per cent in 2006-07 and now we have a suggestion that those borrowing should be required to put down a 20 per cent deposit.

You have a blame game that highlights more people moving to Australia than dwellings being constructed. The Department of Immigration advised that in 2005 – 2006 more than 131,000 people arrived on our shores, yet, we only produced 55,000 new dwellings. A recent report by the Melbourne Institute found rising interest rates and the drought have led to an increase from 10.8 per cent to 15.1 per cent in the number falling into debt and drawing on their savings. And that is just in the last year! The number of people dedicating more than half of their salaries has increased from 5.9 per cent to 7.5 per cent. For those on the land, debt ratios increased from 9.9 per cent to 20.8 per cent. The report also revealed that personal savings fell in metropolitan districts from 57.7 per cent to 50.7 per cent. The study confirmed Reserve Bank research which identified that the highest debt ratios are for those with higher incomes. Seems somewhat strange that those markets are currently in boom where house prices are at peak levels and look like going even higher.

In Mosman, the median price for a house for the twelve months to July 2007 is currently at $1,777,500 and an apartment is $508,500. On the other side, in Cabramatta, (which is a market in decline) the median price for a house is $335,000 and an apartment is $170,000. The stark reality is that today many people simply do not wish to reside in these areas for a number of valid reasons. An argument for Governments to release more land to ease housing affordability is nothing more than a furphy. Why? Because we do not have the required infrastructures in place to accommodate the creation of new suburbs and let’s face it, the State government struggles to get a train past Milsons Point station.

Today, in country towns, we see councils offering vacant land for as little as $1.00 per block (subject to restrictions). The Australian way has clearly identified that families prefer to live by the sea which explains why we have seen population explosions from Gosford to Wollongong. In Thirroul on the South Coast the median price of a house is $491,500 and an apartment $380,000. Then if you head to East Gosford the median price for a house is $370,000 and an apartment is $305,000. This reinforces a compelling argument that today many families seek that irresistible ‘sea change’ as the lifestyle is more appealing than areas of South – West Sydney and, with respect, you could hardly blame them for this decision. With anecdotal evidence that areas closer to water always show greater capital appreciation, it makes plenty of sense that coastal suburbs are today more appealing, because these areas continue to record capital appreciation.

It is much easier now for home owners to go online to property portals to see how much ‘bang for their buck’ they can get and also see how suburbs perform. Today, this method of shopping, is now a fact of life.

I will be taking a few week’s break so management is pleased to announce that talented architect Mr. Peter Tout from Castlepeake www.castlepeake.com.au will be taking over the keyboard. Cheers ^__^

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Despite what some governments say, the housing affordability dilemma won’t go away, until they learn how to treat the symptoms. Better still, where to commence proceedings to better manage the property markets that are simply out of control and if you have money, you are assured of making plenty more in the years ahead. First stop would be the rental markets where in NSW the state government has been on a hiding to nothing, because investors no longer trust them. This explains why they moved out of the property markets to invest in the share market. The state government taxed them out of the market with Vendor Exit Taxes and Land Tax and who could forget the Premium Property Tax.

Property markets are influenced and driven by those two simple economic levers of supply and demand. Those starting off under the current regime, are in for turbulent years ahead as rentals face a minimum of 5 per cent increases per annum. Somehow in NSW, investors have to be encouraged back into the property markets and that won’t be easy given the atrocious record of the NSW government for blatant lying. When investors moved out of the property markets in 2003, vacancy rates were at 4.6 per cent. Today, they are at 1.3 per cent.

You can expect the vacancy rates to remain around this figure for at least 24 months. It will take this long for rental equilibrium, where supply and demand interact and the vacancy rate will have to be north of 4 per cent.

Some are suggesting that now is a great time to purchase real estate. What really needs to happen, is for the State governments to be held to ransom, with a guarantee that they won’t be increasing property taxes nor introducing any new taxes for that matter. Investors need to be offered tax incentives so that this near extinct breed can be saved and encouraged back into the markets as was the case in years gone by. You won’t hear anyone arguing today, that you are better off renting in Sydney than owning, which was the case just a few short years ago. When you look at the respective graphs, building approvals just like rentals, resemble identical twins.

The NSW government has moved these markets to Western Australia and Queensland and we need to get this specialised work force back as this is why approvals are at ten year lows. Again, unless this is stimulated, rents will continue to climb as demand continues to dictate supply. When you look at the Building Approvals graph, it would be fair to suggest that the patient is in a critical condition. However, if you have money you need not worry as the Wealth Graph suggests.

As you can see, the infections set in some time ago, but the respective governments preferred to ignore the Key Performance Indicators.

During a government enquiry back in 1991, the late Kerry Francis Bullmore Packer repeatedly berated the politicians conducting it and when asked about his company’s tax minimisation schemes, said “Of course I am minimising my tax. And if anybody in this country doesn’t minimise their tax, they want their heads read, because as a government, I can tell you you’re not spending it that well that we should be donating extra!”

Now that was to the Federal Government. In NSW the woes continue and very little will change in the near future because it appears that we have a Part Time Premier !! Cheers ^__^

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