Now some so-called ‘experts’ are getting on the bandwagon… saying a property bubble in Australia is about to burst – and comparing our real estate market to countries like Japan & the United States.

Nothing could be further from the truth!

I wasn’t going to run any FRΕE trainings this year. But I’m concerned about all the misinformation flying around and have decided the time has arrived to finally reveal the facts, and set things right for all my subscribers out there who are getting lost in all the media noise about the property market.

Watch this video now to get all the details:

http://investmentmentor.com.au/events/property-boom-strategies-to-prosper-in-todays-environment/

The news is blaring about how terrible the economy is, but has anyone shown you the facts…

• Have you seen what the ABS and BIS Shrapnel have to say about population growth?
• Do you know about our two-speed economy?
• Have any of the experts or newspaper editors backed up what they have to say with graphs & studies which can actually be proven?

Trying to sift the wheat from the chaff is tough. You can end up jumping from confusion to fear & back again – and those emotions can end up pulling you under.

But what if you had the undisputable facts that allowed you to COMPLETELY AVOID all the hearsay so you could get to the heart of what’s happening and make informed decisions about how to invest to secure a prosperous future.

Take control of your wealth building decisions today – these facts will change your game completely and stop you from making costly decisions you could later regret.

Get all the details here:

http://investmentmentor.com.au/events/property-boom-strategies-to-prosper-in-todays-environment/

Warmly,

Nick Lockhart

]]> http://investmentmentor.com.au/news-commentary/from-the-desk/the-property-bubble-myth-finally-put-to-rest/feed/ 2 http://investmentmentor.com.au/news-commentary/in-the-news/what-our-changing-population-growth-means-for-the-property-markets/ http://investmentmentor.com.au/news-commentary/in-the-news/what-our-changing-population-growth-means-for-the-property-markets/#comments Wed, 27 Apr 2011 04:54:51 +0000 Martin Bell @ mrd http://investmentmentor.com.au/?p=13258 Population growth has been a bit of a political “football” in recent times but the fundamental pressures are beyond question.

Recent figures from the Australian Bureau of Statistics (ABS) reveal that population growth has slowed considerably from its peak level of 2.2 per cent in 2008, down to just 1.6 per cent for the year to September 2010. This is however close to our 25 year average, with 345,000 new residents for the latest year; primarily due to a slow down in the surge of net overseas migration that we witnessed in the past few years.

In a recent article in the Australian Property Investor magazine , Michael Yardney has commented that this lower level of population growth is likely to be short lived.

He is reported as saying – “The bottom line is that we’re an ageing population and in order to sustain our economy and support the millions of retirees and pensioners that will be flooding the health and welfare systems over the coming years, we simply have to ‘populate or perish’. Regardless of how hard our politicians push the political barrow and how much noise they make about slowing down immigration, the fact remains that we have to increase our skilled labour force. Then there’s the rising rate of natural population growth due to our increasing lifespan and birth rate, which is completely outside the government’s control. “

The aging population is an issue common to all countries to a greater or lesser extent. We are told that around 43 per cent of our workforce is made up of Baby Boomers, many of who are going to retire over the next 15 years, but lack sufficient savings or superannuation to see them through their senior years.

As they leave the workforce they’ll stop paying tax, many will go on the pension and most will use our public health care system, placing a massive burden on our economy.

As Michael Yardney says “Despite the rhetoric from both sides of parliament we have to significantly increase our population to replace the workforce, capture skills and grow the economy. The question then becomes: where do we house these essential new residents?”

Adding to the population issue a recent article in the Courier Mail said that thousands of Queenslanders were already on the waiting list for public housing.

The main points in the article were-

1. Almost 30,000 in Queensland were waiting for a roof over their heads.

2. Canberra has declared state-managed public housing “outdated” and financially unsustainable.

3. Federal Housing Minister Mark Arbib has called for private investment into the state housing market, labeling the present system unsustainable.

4. Mr Arbib has forecast a 28 per cent spike in demand for housing in the next decade.

Politicians can debate the population issue as much as they like but the demographic pressures will continue to grow.

Happy investing,

Martin Bell

The paper said “With demand exceeding supply, first-home buyers, already jittery following interest rate rises, have even less chance of entering the market.” This generally leads into the discussions of housing affordability with another article in the same paper headlining “Unaffordable housing is the great Australian nightmare” and saying “International standards recognise an affordable house as three times household median incomes, but in Brisbane and the Gold Coast, prices are more than seven times the average income.”

At the risk of boring people who have heard me drag this one out before…

Some years ago Marion and I went down to Sydney to see the War of The Worlds musical. While walking in the Homebush area we came across the Old Sydney Brick Pit and there I found a plaque saying that the average Sydney home cost £1,600 in 1911 when the brick pit was running and the average annual wage was £200.

So the average home cost 8 times the average annual wage (just as it does now in round figures). Not a lot of price change that I can see; however, I do see big change when it comes to peoples expectations in a house these days.The real differences in housing today vs. 1911 are:

• Homes today are much bigger
• Homes today have an internal laundry (and automatic appliances)
• Homes today have multiple bathrooms (whereas in 1911 you would have an outside toilet)
• Homes today have at least one ensuite, often a media room, usually a double lock up garage, air conditioning, a dishwasher etc and so on.

It’s also worth noting that today around 70% of people own their own home and just 30% rent while it was the other way round in 1911.

I don’t know what sort of floor area you got for your £1,600 in 1911 – however, I did find the following figures showing how average home sizes have changed just since 1984:

• 149.7 sm 1984/85
• 228.1 sm 1998/99
• 253.1 sm 2008/09

That’s about a 70% increase in average floor area from 1984 to 2009!

Not so long ago our media was reporting that Australian homes were, on average, now the largest in the world (yes bigger even than in the US) – so again I think it’s expectations that have to be managed.

If Australians cannot afford to buy the house of their dreams (or expectations) then perhaps they will be “locked into a life of renting” as the paper suggested.

Oh, and if that is so then why not join me in being one of the the someones needed to provide those rental properties?

Where your dreams, goals and/or expectations exceed your ability to afford them you have two choices:

1. Downgrade your expectations and be content to remain living within your limited means
2. Do something today so as to change your financial position tomorrow – so that you will be able to afford your dreams

If you chose Option 1; do nothing! But if you chose Option 2 then complete a “My Starting Point” form online and we will assist you to develop a workable and realistic plan (complimentary and without obligation, of course)

My Starting Point – secure and encrypted online form – available >>>here

Happy Investing,

Martin Bell
Our Customer Care Program works for you… because investing is personal!

2010 has seen the number of first home owners entering the market continue to trend down. This is to be expected given we have seen higher interest rates, higher home values and of course the end of the Federal Government’s boost to the first home owners grant.

Overall our strong economy and low unemployment levels should ensure that this slowdown will not be as dramatic as it otherwise would be.

Australian Bureau Of Statistics

According to the Australian Bureau of Statistics (ABS) borrowings by first home buyers:

• Averaged 115, 698 a year between July 1992 and July 2010
• Peaked in the 12 month period of November 2008 to November 2009 – 193,247 in total – 67% above the abovementioned eight year average!
• In the 12 month period of July 2009 to July 2010 totalled 129,842 – down 33% on peak but 12% up on annualised average.

State By State Breakdown

Breaking down these finance commitment figures to look at each state and territory we see that Western Australia experienced the greatest drop off in first home owner activity. This was followed by Queensland… while activity in the ACT remained closest to peak figures.

Building Approvals (as per ABS)

Total Dwelling Units

• The trend estimate for total dwellings approved fell 2.7% in August 2010 and is showing falls for six months.
• The seasonally adjusted estimate for total dwellings approved fell 4.7% following a rise in the previous month.

Private Sector Houses

• The trend estimate for private sector houses approved fell 1.8% in August and has fallen for eight months.
• The seasonally adjusted estimate for private sector houses approved fell 4.3% and has fallen for three months.

It is apparent that uncertainty in other parts of the global economic market, higher interest rates and limited funding being made available for developers and purchasers alike has had an impact on our property market.

Regardless of the economic, social or political causes; our population numbers continue to swell at record levels (demand) and the numbers of new dwellings continues to diminish (supply); this presents a genuine opportunity for those who:

1. Can see it
2. Are in the position to (safely and responsible) take advantage of it

Remember that in every adversity are the seeds of a bigger and better opportunity.

I received a newsletter last night from another property group. It started with:

“Homeowners and buyers again breathed a collective sigh of relief this week when the Reserve Bank (RBA) announced its decision to leave interest rates on hold for the fourth consecutive month.”

In reality, however, higher interest rates do have an upside for property investors in that they create increased rental demand; as the above statistics show. Generally speaking our nation is already experiencing a tight rental market and with our population growing and less new dwellings coming onto the market this is only going to get “worse”.

The upward pressure these forces will continue to place on rental properties can only result in higher rents… which in turn leads to greater rental yields… attracting investors and first home owners back into the market… pushing property values up again. It is all part of a normal property cycle!

The “Tricky Bit”

I guess the tricky bit for you and me is to stay anchored to the big picture… our medium to long term goal… so that those machinations around us will not derail us and leave us to be “pension bound”.

Age Pension rates from 20 September 2010 (per fortnight)

• Single $658.40
• Couple $496.30 each

Macro Vs. Micro

While I “preach” the absolute importance of having a long term focus or goal (Macro view)… I am as equally committed to impress the necessity of only making fully informed and responsible decisions. There is no point in recklessly crashing and burning along the way.

To understand your starting point; i.e. where you are today… and what may (or may not) be possible with respect to moving forward at this time; I invite you to take up our complimentary and no obligation offer to have your current starting position assessed. Once that has been done an mrd property mentor will be happy to take you through a “Personal Results & Options Plan” (PROP); should you want that. A PROP will leave you with a clear road map to take you from your current position to your desired outcome… highlighting the steps required. Of course, it’s then over to you to decide whether to follow that road map or alter your goal.

Achieving the big goals in life first require dealing with the small steps immediately before us. To take up our complimentary no obligation offer… simply complete our online (secure & encrypted) “My Starting Point” form >>>here.

Happy Investing,

Nick Lockhart
Our Customer Care Program works for you… because investing is personal!

Do you remember when the GST was introduced into Australia? It was July 2000. Since then, most working singles and couples could have managed to secure (at least) half a dozen well researched residential investment properties. If you did this; congratulations! No doubt, with falling interest rates and a seriously growing housing shortage… the global slowdown would be delivering you more benefits than challenges right now!

Reaction is all too common! Why wait for drastic times to push us to those “drastic measures” that the politicians keep spruiking?

Doesn’t it make more sense to conduct our financial affairs during the good times in preparation for those drastic times… that always find us sooner or later?

Now while we can’t change the past, it is unwise… perhaps irresponsible… not to learn from it!

• Wealth gives financial options… to work or not; full time or part time
• Wealth allows a family to capitalise their expenses through the leaner times, should that be necessary
• Wealth allows you the luxury to assist an aged parent or take your children travelling and broaden their horizons in life
• Put simply, wealth will allow the construction of a “force field” around your family so that when (not if) financial pressures come your way, they are found to be impotent and ineffective… as far as you and your family are concerned anyway
• Wealth allows you to take advantage of opportunities when they present

No!!! It is not drastic times that call for drastic measures; but life itself!

Sooner or later, LIFE calls for drastic measures. Therefore, until you have created your security and made provision to “pay for the rest of what your life will cost”… you should (1) have a workable plan and (2) be working that plan. So let me ask… are you?

You Have A Duty Of Care!

We get up each day and go through our routine, join the “rat race” and head to work! Why? To earn a living! Let’s not deceive ourselves… earning a living will never on its own deliver us lifestyle.

Unless you are doing something on the side; i.e. separate to your job… like kicking off your part time business, writing the songs that will form your first CD, working on securing a patent for your invention before taking it to market… or perhaps leveraging off what you already have to increase your asset base… you are derelict in your financial “duty of care”… and it is certain that lifestyle with cashflow (as opposed to debt) will never be your experience.

Yes!!! We first need to earn a living, but if that is all we are doing… if we are not simultaneously creating tomorrow’s lifestyle… we (absolutely) will be disappointed! It’s not a matter of if, rather when! Some people’s neglect catches up with them sooner, while others later. Either way, sooner or later our neglect will catch up with us. Hopefully when it does, there will still be time to do something about it.

While we have no choice but to endure pain at some time, we do have a say in which pain we will endure. Which have you decided upon?

1. The pain of discipline now, for a season
2. The pain of regret later, for the remainder of your life

Each and every day; in both the good times and bad… we should be doing something to take us a step closer to the realisation of our dreams and goals.

Don’t wait for ‘your ship to come in’. You began constructing it long ago already, piece by piece… and right beneath your feet. Truly talented musicians and sportspeople endured the pain of discipline for years and years before there ever was a hint that success was heading their way. Day in and day out, little by little… they did “something” to take them closer to their goal. Remember that it takes years to create an “overnight success”.

In an interview, one Australian Olympic swimmer said he never missed a training session. This was so that when he stepped up on the starting block he would know that he had done everything absolutely possible to be the best athlete that he could be. Whether tired or full of energy, whether the water was cold or warm or whether or not he felt like it… he did something towards his goals every day.

Constant and Unrelenting Action

Any worthwhile endeavour will require constant and unrelenting action. Taking great financial care of your family is not all they need from you… but is very, very necessary all the same. Let’s face it… the alternative is not worth considering.

Subprime, Fannie Mae, Freddie Mac, Global Credit Crisis, Recession, unemployment and so on and on! These words are not valid excuses for taking time off. Like the swimmer… rain, hail or shine… he swam. Making forward progress is sometimes quite easy and other times it’s really, really hard… but it’s always necessary.

There are times when it is prudent to conserve your financial resources while you seek out new opportunities… there are times when it is most prudent to step out and take action. For some it is now a time to consolidate. For others it is a time to move forward. Whatever choices we make on a daily basis, they ought to be carefully and responsibly considered responses to both our goals and circumstances… not a reaction to fear, uncertainty and confusion.

The important thing is to constantly do something towards your goals.

• Clearly define your goals
• Be real! If you are not prepared to fight for a goal… it isn’t really one at all
• Know your income(s) and expenditure
• Know where your money is being spent
• Identify wasteful and unnecessary leakage
• Get a financial health check
• Fine tune your cash flow structure
• Have your finances assessed to see what resources you currently have
• Learn all you can about your chosen strategy [did you catch that one?]
• Look for ways to overcome your next hurdle
• Remain focused and don’t get distracted

Remember, the financial “ship” that will keep your family afloat is being built piece by piece beneath you… and by you!

Regardless of where you are on your journey; just getting started or well on your way… discipline yourself daily to make some forward progress.

Walking the Talk

Each of the 8 members of the mrd team are doing just this. Our youngest team member’s daily activity includes learning and saving for a first deposit. Now is not the best time for him to buy, but he is doing something! Every admin person, including our part time bookkeeper has either settled an investment property with mrd or is unconditionally contracted to do so. All are looking beyond their next purchase and planning more.

Then there is Martin’s example. Martin set a goal to become a property multi-millionaire when he was 50. On a daily basis he then steadily progressed towards that end and at 58 years of age he retired (sort of like an Olympic achievement… considering how little he had in his favour at the age of 50). Today Martin works as an mrd Property Mentor on a part time basis… and by choice. He does not need the income as much as the involvement in helping others do likewise. If you have not spoken with Martin and had him tell you of his journey, maybe you should. Doing so would constitute as “doing something“… and cost you nothing.

If small doable, daily actions become a part of your routine… what now appears as a hopeful horizon may soon become your experienced reality! That’s when you will start to hear over and over again… people telling you how “lucky” you are.

Our Customer Care Program will work for you… because investing is personal. Don’t be afraid to ask for our help… thinking it will somehow be taken as a license to sell you something. That is so far from the mrd DNA, it’s laughable. We will assist you on your journey from where you are to where you want to go. We will do so respectfully and responsibly and at all times empowering you to make your own fully informed decisions. Personally, I think you should have a chat with Martin and ask him to assist you with an mrd “Finance Structure and Cashflow Health Check”. This is Step 1; the diagnosis phase… from where changes can be made to possibly assist you to:

• Pay off your mortgage sooner
• Eliminate horrible debt faster
• Legitimately reduce the amount of tax you are paying
• Do away with unnecessary property record keeping
• Keep your accountant’s charges to a minimum
• Set real (and achievable) goals
• Define a track to run on… so you are not derailed along the way

To take advantage of this no obligation, complimentary offer from mrd you will need to complete a Borrowing Capacity Assessment form. NB: While you may not be looking to borrow money at this time, the information gathered on this form is nevertheless essential before we can conduct a “Finance Structure and Cashflow Health Check”.

• To complete the BCA form, please click here
• To send a message to Martin, along with your details to have him contact you, please click here

CONGRATULATIONS; you have now finished reading this article; what next piece of your “ship” are you now going away to construct?

Happy Investing,

Nick Lockhart

mrd customer care program… because investing is personal

The best thing we can do with a problem is rename it! It’s not a problem, it’s a “challenge”… and with every challenge comes an opportunity to grow!

“Those who remain flexible rarely get bent out of shape”!

When Katrina and I settled our last property purchase we were without a tenant for almost 4 weeks! Given the housing shortage, we were very surprised.

So why did it take that long for us to secure a tenant?

Probably a combination of:

• Just an aberration at that time
• A result of the global economic downturn
• Reaction to the frenzy the media has whipped up by those who can move back home with mum & dad… or share accommodation when they would normally live separately

Whatever the reason, it doesn’t really matter.

Those few weeks seemed to go on forever. Looking back, they actually passed quickly and the “challenge” we faced was nothing more than a glitch in yet another successful attempt to convince a bank to let us leverage into another appreciating asset; using their money rather than ours!

Finding A Tenant

So what did we do to ensure we secured a tenant?

We did what any self respecting new vendor would do when he/she did not secure a tenant quickly… we dropped the rent! Twice!

You what???

We dropped the rent we were asking twice! If we are going to make a success of our financial position over time… then it is a given that we are going to have to stay fluid… or remain flexible. It is imperative that we meet the market where it is.

OK, I admit that the events of the past 18 or so months have seen real estate prices and rents soften a little in many places… but the overwhelming reality over many decades has been and will continue to be that prices rise. Property prices and rents will double again over the next property cycle… so why sweat the small stuff?

Six months before we settled the rental market would have paid more to lease our new purchase. However by the time we settled, not only did we have to accept less weekly rent, we had to absorb a few weeks of no rent.

Was I worried?

Like anyone who has just settled a property I wanted a tenant ASAP; but no I wasn’t worried. I saw my empty property as a challenge that needed addressing, so we did and “problem” fixed.

Had we secured a tenant from day 1 and for the higher/expected rental figure and had interest rates still been where they were six months earlier, we would have been (significantly) worse off  anyway. The saving we made with greatly reduced interest rates has left us a lot better off.

Don’t freak out if your tenant moves out and you property manager suggests you may need to reduce the rent to “meet the market”. While it is not common; sometimes prices move down temporarily… even though they are trending up. This is all part of normal cycles and adds argument to why we promote a set ‘n’ forget… for busy people approach to property investing. With the ‘buy & hold’ strategy a dip in values will only affect my ability to borrow as much again, in the short term. It will not impact on me, however, in any significant way at all.

So, Am I Better Off Now Than I Was 6 Months Ago… Even Though I Am Collecting Less Rent Now Than I Was Then?

Absolutely! An investor with a $350,000 mortgage pays $215 a week less in interest payments than they did six months ago… so even if they take $20 or $30 a week less in rent they are still ahead by a country mile! In our case we paid a lot more than $350,000, so our savings are even greater!

Add to that the expected capital growth over time.  If a property worth $350,000 doubles in 8 years for example, it will average $840 a week in growth.

Why would I be concerned about losing $20 or $30 a week for 6 or 12 months?

I guess my message here is to say that in the process of wealth creation:

• Don’t sweat the small stuff
• Remain flexible (and don’t get bent out of shape if something doesn’t go exactlty to plan)
• Meet the market where it is
• Understand the BIG picture
• Buy to hold
• Don’t be alarmed if your properties attract marginally less rent for a season. The savings you have had in interest more than compensate for this many times over!

Send us your property investment questions (and or requests) by replying to this article (blog), below.

Happy Investing,

Nick Lockhart
mrd Customer Care Program… because investing is personal

In the RBA’s Statement on Monetary Policy released today, the RBA concluded (p33): “After falling modestly in 2008, nationwide housing prices were little changed in early 2009, although there is some variation in the range of available measures that use different techniques to control for changes in the composition of property transactions (Table 10).”

In Table 10, the RBA shows five different measures of house price changes in the March 2009 quarter.

Four of those measures – from APM, which uses a stratified median price index, and my company, RP Data-Rismark, which uses an hedonic regression technique – were positive or flat across Australia while one, the ABS’s stratified median price index (the one that the media has focused on), was down strongly.

The ABS’s index data does not sit well with the RBA’s conclusion that “nationwide housing prices were little changed in early 2009″.

>>> Business Spectator – The RBA’s view on house prices – Blog – Christopher Joye.

High levels of immigration are fuelling record population growth.  

Australia’s headcount increased by almost 400,000 last year to 21.5 million, fresh data from the Australian Bureau of Statistics (ABS) shows. More than half of the new arrivals, or just over 230,000 people, were immigrants. The rest were babies born in Australia. The federal government this week moved to reduce immigration, cutting the skilled migrant intake by 14 per cent in response to the economic crisis.  

The rate at which the population is growing has surged 50 per cent over the last five years. It is now growing at just under two per cent a year. “The last time Australia experienced higher growth rates was in the 50s and 60s as a result of post war migration and high birth rates,” the ABS said in a statement.  

Western Australia and Queensland attracted the most new people in the year to September 2008. Tasmania was spurned.

For people moving within Australia, Queensland was the mecca, while people from NSW appeared keen to leave their state.

Cathy Alexander, Sydney Morning Herald

March 18, 2009

Australia experiences high population growth: Australian Bureau of Statistics (ABS)

Australia is continuing to record high population growth, according to figures released today by the ABS.

A total population growth rate of 1.8% was recorded for the year ending September 2008, up from the 1.2% recorded five years ago. The last time Australia experienced higher growth rates was in the 50′s and 60′s (above 2%) as a result of post war migration and high birth rates.

As at 30 September 2008, Australia’s population had grown to 21,542,000 an increase of 389,000 people over the previous year. Australia’s net overseas migration contributed to more than half of this growth at 61% or 235,900 people. Natural increase (the excess of births over deaths) contributed 153,400 (39%).

In the same period, Western Australia continues to record the fastest population growth at 2.9%, followed by Queensland (2.5%), the Northern Territory (2.2%), Victoria (1.8%), the Australian Capital Territory (1.4%), New South Wales (1.3%), South Australia (1.1%) and Tasmania (0.9%).

Queensland and Western Australia received the most people from net interstate migration, gaining 22,700 and 5,600 people respectively from the other states and territories. The states that lost the most people to interstate migration include New South Wales (down 22,400), South Australia (down 4,700) and Victoria (down 2,400).

In ancient Greece Socrates (469 – 399 BC) was widely lauded for his wisdom.  One day the great philosopher came upon an acquaintance who ran up to him excitedly and said, “Socrates, do you know what I just heard about Plato, one of your students?”

“Wait a moment,” Socrates replied.  “Before you tell me I’d like you to pass a little test.  It’s called the Triple Filter Test.”

“Triple filter?”

“That’s right,” Socrates continued.  “Before you talk to me about my student let’s take a moment to filter what you’re going to say.  The first filter is Truth.  Have you made absolutely sure that what you are about to tell me is true?”

“No,” the man said, “actually I just heard about it and…”

“All right,” said Socrates.  “So you don’t really know if it’s true or not.  Now let’s try the second filter, the filter of Goodness.  Is what you are about to tell me about my student something good?”

“No, on the contrary…”

“So,” Socrates continued, “you want to tell me something bad about him, even though you’re not certain it’s true?”

The man shrugged, a little embarrassed.

Socrates continued.  “You may still pass the test though, because there is a third filter – the filter of Usefulness.  Is what you want to tell me about my student going to be useful to me?”

“No, not really”

Well,” concluded Socrates, “if what you want to tell me is neither True nor Good nor even Useful, why tell it to me at all?”

The man was defeated and ashamed. This is the reason Socrates was a great philosopher and held in such high esteem.