It appears that the “governor of moolah”, Ian Macfarlane is somewhat perturbed about the ratio of household debt to household income, and he recently threw his book of statistics at anyone who cared to listen. Of major concern to the “Gov”, is that we as a nation have exceeded our borrowing capacity and he believes that now is the time to show restraint, because household debt to household income has increased from 56 to 125 per cent, over the past decade. Well, ten years back we were in recession and ten years on, the values of properties have doubled and tripled in some instances. This in-turn allows homeowners to borrow against the asset to acquire investment properties. In 2003 money has never been cheaper to borrow, and homeowners are taking full advantage of this. You only have to look at the capital appreciation that some Sydney suburbs are returning. A few weeks back, I wrote about Saddington Street St Marys. If you purchased there in 2001 for $93,000, twelve months later it was worth $157,000, which identified a tidy tax-free gain of 68.8 per cent. Australians are simply playing the property market!!

This reality is further identified by the statistic that borrowings on housing, account for 83 per cent of the total household debt, and the bullet performer in this figure is borrowings on investor housings which stands at 30 per cent as compared to 18 per cent just a decade ago. One does not have to be Einstein to realise that property today is much better understood, and investment brokers are steering their clients to bricks and mortar, as a preferred investment recommendation. Some argue that you make more money these days by owning shares in a bank, than by having your money invested there.

The recent figures released by the Australian Bureau of Statistics for the September 2002 quarter for Household assets further accentuate where the hard-earned is going, with housing accounting for more than 60 percent of assets and superannuation and life insurance making up just 15 per cent. This is a complete reversal in the overall understandings of retirement investment, with the vast majority pushing property over superannuation. It is blatantly obvious that many are on the move every five to ten years. No wonder the “Gov” is concerned, he has been in the same Mosman home since the early seventies, and his acquisition costs would have been about the same as a Saddington Street purchase in 2001.

One of the main reasons why so many are looking at property is because it does not attract as much government intervention, as say superannuation, which has always attracted perplexities of confusing tax changes. On the other hand Bob ‘the builder’ Carr has made taxing property in NSW an art form. He is currently bemused with the recent advice that he can’t insist that all e-mails sent from NSW must have a postage stamp affixed. For those who have been following the future of the tax-effective home loan, you will have to wait until the end of the year. The High Court has agreed to hear an appeal by the Australian Taxation Office. For those who have not been keeping up with this it is all about splitting your loans to allow borrowers to claim interest on their home loan as a tax deduction, if they are also financing an investment property. Should the appeal be unsuccessful, this will be a major victory for the people of Australia, and household debt will increase further as many more take advantage of their investment opportunities.

The Mosman homeowners have plenty to cheer with today’s release of the average price for a home to March 31, 2003 hitting a record high of $1,785,349 which is up on the February figure of $1,725,066. A paper gain of $60,283 for the month, and it is tax free! This figure should actually be higher as it does not contain the off-market sales, nor those with confidentiality agreements which are the big sales. The property market is set to kick off in earnest again next week after the Easter and Anzac Day long weekends. This week’s Mosman Daily is as skinny as a certain opposition leader’s popularity.

Have a great long-weekend and I am not convinced that many actually left Sydney, as subscriptions have been exceeding expectations. Lest we forget. Cheers and clink… ^__^

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