Thursday, May 27, 2010

Latest Property News from Ted Hanson

Friday 28 May 2010
Quote of the week....

"If you want to understand the causes that existed in the past, look at the results as they are manifested in the present.

And if you want to understand what results will be manifested in the future, look at the causes that exist in the present."

Affordability drops in March Quarter

The decline in housing affordability continued early in 2010, according to the latest HIA-CBA First Home Buyer Affordability Report.

Housing affordability fell in the March 2010 quarter, dropping by 4 per cent to be 28.7 per cent lower than 12 months ago.

Through the quarter, affordability fell by 4.2 per cent in the capitals and 5.3 per cent in regional areas to be lower by 30.5 per cent and 24.8 per cent respectively compared to March 2009.

The largest falls were recorded across Victoria (down by 10 per cent in Melbourne and 15.9 per cent for Regional Victoria), Western Australia (down 6.6 per cent in Perth and 14.2 per cent in regional WA) and regional New South Wales (down 12 per cent).

Remote to cut costs

A new web-based smart metering system has been developed by CSIRO to enable householders, small businesses and electricity retailers to remotely control energy use over a broadband internet connection.

The aim is to help small-scale energy users cut energy use, costs and carbon emissions.

CSIRO project leader, Dr Martin de Groot, said the system would give householders the flexibility to cutback their electricity use at times when it's needed elsewhere on the grid.

The system involves installing a mini smart-meter in a household or business electrical switchboard, which can then be managed remotely from a centralised control platform.

"The householders can even receive alerts on their mobile phones notifying of any significant changes in energy use in the home."

CSIRO has estimated that in Tasmania (where the new technology was developed) alone, the State's annual electricity expenditure could be cut by $10.9 million, even if less than 10 per cent of Tasmanian customers used the system.

If just 10 per cent take up the technology, the annual savings for those users is estimated at up to $200 for householders and $1,300 for small businesses.

The infrastructure is cheap, can be retrofitted to existing buildings and complements other technologies such as local generators and intelligent home automation systems.

CSIRO worked with energy service company Energy Response to develop the remote control system software and with hardware designer Saturn South to build the mini smart meters.

The system was on display at the CeBIT technology conference in Sydney this week.

Love food, hate waste

Did you know that food waste is the largest single component of our garbage?

Council waste audits show that each year, NSW households generate 800,000 tonnes of food waste and businesses generate 300,000 tonnes. This means $2.5 billion worth of food (about $1,000 a household) is thrown away each year.

So it is that the NSW Government this week launched Love Food Hate Waste - an internationally successful campaign to help thousands of households and businesses reduce growing amounts of food waste.

"Food waste makes up a massive 40 per cent of the total rubbish in our household bins; that is 315 kilograms a home," Minister for Climate Change and the Environment, Frank Sartor said.

"There are also major consequences for the environment when we throw away food - it goes directly into landfill where it turns into methane - a gas 25 times more potent than carbon dioxide.

"There are simple things we can all do to waste less food, including buying only what we need, preparing and cooking correct amounts, and storing food items properly.

"Love Food Hate Waste - is a partnership program based on a successful campaign in the United Kingdom which supports households to adopt simple and easy behaviours that work to reduce food waste."

The website offers help in the form of a portion calculator, tips on what to buy and when, recipes and how best to store food.

Mr Sartor said the program will help NSW meet its municipal waste reduction target of 66 per cent and commercial and industrial waste reduction target of 63 per cent by 2014.

"This target is equivalent to reducing greenhouse gas emissions in NSW by about 640,000 tonnes of CO2 per year - that's the same as permanently removing 159,000 cars off the road," Mr Sartor said.

"For every tonne of food waste prevented from going to landfill, 0.9 tonnes of carbon dioxide can be saved.

"To put this into perspective - by preventing all household food waste from going to landfill we would save more than 720,000 tonnes of carbon pollution in NSW each year.

"When food is wasted, the energy, water and natural resources used to produce, harvest, process, package, distribute and market it are lost.

"By reducing the amount of food we waste, the community can play a simple and positive role in reducing the environmental and climate change impacts of the nation's food supply system."

The UK's Love Food Hate Waste campaign commenced two years ago. Research to date has found that the campaign has reached more than 1.8 million people and has prevented more than 137,000 tonnes of food from being thrown away.

How waterproof is your bathroom?
Guidelines for the waterproofing of wet areas in residential buildings have been re-defined in the latest version of the Building Code of Australia, as the issue has consistently been one of the most commonly recurring major building defects, with home-owner complaints about defective waterproofing ranking third highest over all complaints received regarding building work.

Water damage is second only to fire as a cause of building decay and deterioration. Apart from the obvious casualties such as rotting of timber structures and finishes and the corrosion of metals, damp can cause plasterboard to swell, ceramic tiles to come loose and carpet to rot.

From a health aspect, electrical hazards and respiratory problems are more prevalent in a damp house.

Leaking showers represent a significant proportion of wet-area failure, followed by bathrooms then laundries and toilets. Here's a checklist to help track down the source of the leaking.

* The main tell-tale sign of trouble is peeling, bubbling or stained paint or efflorescence salts on the wall behind a shower, bath or basin - this may be evident in the bathroom, laundry, etc itself, or in an adjacent room. Plaster and render can also be affected, often causing it to become detached from the wall.

* Look at the general condition of the shower. What is the condition of the grout and sealant? Cracked or loose tiles are a significant cause of shower leaks. Unfortunately, simply removing the loose tiles and re-fixing them is not the answer. Dampness may be rotting the base to which the tiles are attached, and all affected areas need to be redone.

* Next, check if the shower, screen or drainage system is leaking. Make sure that the shower screen has been properly installed and sealed. (It should be flush with the inside face of the hob).

* Check the roof drainage connections for signs of leaks - does the leak only ever happen when it rains?

* If none of these exposes the culprit, it is time to check if the shower tray is damaged. Plug the shower drain hole; fill with water up to 25 mm from the top of hob or 10 mm from the top of the step down and check for leaks. Allow water to sit in the shower for at least 12 hours.

Once you have determined the source of the dampness you can then decide on the best method to treat the problem. In most instances you will probably require a professional to assess the problem, suggest a treatment and quote for the repair work.

Holding Costs

The term "holding costs" in property refers to the outgoing expenses incurred by an owner of an investment property pending receipt of rental income from a tenant or the sale of the property to another party.

Holding costs generally include such items as council rates, insurance, strata levies (if applicable), maintenance and interest costs and any mortgage interest paid. For property investors most holding costs can be offset for tax purposes against income.

It's what's inside that counts

A home-cooked meal is always worth the effort, though sometimes it seems you can spend a lot of time finding what you need - especially if there are other "cooks" in your kitchen.

Maybe that's what prompted the design of custom kitchen cupboards that have translucent white panels and a backlighting system that casts silhouettes of the objects inside each cabinet.

Thursday, May 20, 2010

Latest Property News from Ted Hanson

Friday 21 May 2010
One week to go until Australia's Biggest Morning Tea!

The count down is on........Southern Estates will be hosting a "Biggest Morning Tea" at our office at 98 Market St, Wollongong on Thursday 27 May at 10:30am. We would love for you to come along and join us for a warm cuppa, a delicious assortment of cakes and great company!

By taking part you can help Cancer Council support the 1 in 2 Australians who will be diagnosed with cancer before the age of 85!

Here's how every cup counts:

$5 can help us give a newly diagnosed cancer patient important support and information resources to help them through their cancer journey.

$10 can help staff the Cancer Council Helpline (13 11 20) with expertly trained nurses and health counsellors.

$20 can help train a Cancer Connect volunteer to provide one-to-one support for people diagnosed with cancer.

$50 can help us visit a community to educate health professionals and support patients and carers.

$100 can help provide SunSmart educational talks to schools and community groups.

$500 can help fund research into the causes of cancer and into new and improved treatments.

Please let us know if you can join us by either emailing Nicki at or simply phone our office on 4229 5344 and leave a message with our fabulous Receptionist Tamsyn.

We look forward to seeing you soon!

Confidence reaches historical high

A record number of Australians are preparing for property prices to increase in coming months, as demand for housing continues to outpace supply, according to a new survey released this week.

The latest Bankwest/Mortgage and Finance Association Home Finance (MFAA) Index shows three quarters of Australians (76 per cent) believe prices will rise in the current quarter.

The data shows it's the people upgrading or buying their second homes who are fuelling interest in the property market.

Three quarters (74.8 per cent) of `next time' buyers also believe it is a good time to purchase investment property - up sharply from the record low 14.5 per cent recorded during the height of the credit crisis.

In contrast, prospective first time buyers are more cautious about the market, with only 43.7 per cent believing now is a good time to buy compared to 49.7 per cent in the last survey.

According to Vittoria Shortt Chief Executive, Bankwest Retail, although interest rates are rising next time buyers are returning to the property market because of confidence in the economy and the jobs market.

"Historically, the market has proved a good barometer of home owners' confidence in the economy," said Ms Shortt.

"During the early stages of the GFC house prices slipped, then the market recovered as first time buyers flooded the market. Now the baton has been passed to upgraders who see it as a good time to buy because of a strong economy and confidence in their job prospects.

"We are also witnessing the return of investors to the market as a tight rental market see the potential for good rental yields", she added.

"Savvy next time buyers are also aware of impending interest rate rises and are factoring these into their decision making process."

The latest Index has also shown that of the many people who are expecting the cash rate to keep climbing, almost half (47.1 per cent) predict interest rates will rise by more than 0.5 per cent within the next 12 months.

The day after tomorrow

It's hard to deny that the future is rapidly approaching. An entrepreneurial company in the US is offering a solution for anyone wanting to survive polar shifts, massive volcano eruptions, solar flares, earthquakes, asteroids, tsunamis and nuclear attacks, just to name a few, with a series of modern life-style-equipped underground bunkers.

The Vivos Complexes are deep underground, airtight, fully self-contained shelters designed to survive virtually any catastrophe and capable of accommodating 200 people for up to 1 year.

One bunker is now established under the Mojave Desert, California, with 19 others planned in strategic spots so that it will take no longer than three days to reach from anywhere in the US. Securing a spot costs around AU$57,000 for humans, pets are welcome free. Members need to only arrive before each facility is secured, or it may be a lonely apocalypse on the outside.

Australia's population exceeds 22 million

Australia's population reached 22,066,000 as at 30 September 2009, according to figures released recently by the Australian Bureau of Statistics.

This is an increase of 451,900 people over the previous year, keeping the growth rate high at 2.1 per cent.

The majority of this growth (66 per cent) was due to net overseas migration, with the remainder (34 per cent) due to natural increase (the excess of births over deaths).

All states and territories experienced positive population growth over the 12 months ended 30 September 2009. Western Australia recorded the largest percentage gain (2.9 per cent) and Tasmania the smallest (1 per cent).

More people, more first homebuyers

The rapidly increasing number of people in Australia is one of the reasons why First Home Buyer intentions are not expected to fall to the same extent as they did following the expiration of the previous First Home Buyer Boost Scheme in 2002, according to research by BIS Shrapnel.

QBE Lenders' Mortgage Insurance (QBE LMI) has just released its latest lmiMortgage Update (researched by BIS Shrapnel), which reports on first home buyer attitudes and activity.

The report anticipates loans approved to first home buyers to be relatively strong at 110,000 to 115,000 in 2010; this is a healthy 27 per cent above the low point of loans to first home buyers in 2003/04.

Ian Graham, CEO of QBE LMI, remarked that it is not surprising that the withdrawal of the First Home Owner Grant Boost Scheme (FHOGBS) as well as a number of interest rate increases have had a short term impact on demand in the market.

"This was expected, given that many first home buyers brought forward their intentions to enter the housing market in 2009", Mr Graham said.

"The research by BIS Shrapnel shows strong population growth in the first home buyer age cohort (25 to 39 year-olds) totalling 3.2 per cent over the three years to June 2012.

"The solid growth in this age group will result in a bigger pool of first home buyers in the market which will support demand in the future", he added.

The research shows that first home buyers are adjusting their expectations by turning to established or smaller dwellings, such as townhouses and apartments.

"Forecast rental increases will also be a factor in driving first home buyer demand", Mr Graham said.

"The move from renting to paying off a mortgage will continue to be an attractive option and as a result will encourage many first home buyers to enter the market in the year ahead" he predicted.

Commitments down

Housing finance commitments fell in March this year, for the sixth month in a row, according to figures released this week by the Australian Bureau of Statistics.

The total number of dwellings financed for owner occupiers, seasonally adjusted, fell by 3.4 per cent in March, to be down 23.3 per cent on March last year.

The number of loans for `new' dwellings (construction/purchase of new dwellings combined) fell by 6.3 per cent in March to be down by 5.8 per cent on the same month last year.

Loans for the construction of dwellings fell by 7.3 per cent in March (a rise of 1.6 per cent on the same month last year), however loans to buy new dwellings fell by 3.2 per cent in March, to be down 21.7 per cent on March 2009.

The number of loans for the purchase of established dwellings fell by 2.9 in March, to be down 23.3 per cent on the same time last year.

The value of lending to finance the purchase of investment housing rose by 3.0 per cent in March, to be up 24.0 per cent on a year ago.

The value of lending to finance construction of dwellings for rent or resale fell by 2.1 per cent, but was up 12.9 per cent on last year.

Despite the disappointing results, peak building and construction organisation Master Builders Australia remains optimistic about work in the pipeline.

"Owner occupier loans for the building or purchase of new dwellings have (also) come back in recent times, but remain up 30,000 to 40,000 dwellings in annualised terms from the low point in late 2008, suggesting a solid pipeline of new building work yet to be done", noted Peter Jones, Master Builders' Chief Economist.

A relaxing chair that rocks

A gentle rocking motion has been found to have a calming, relaxing effect on people of all ages, from babies to the elderly and most anyone in between. Add to that the sound of waves gently lapping on the shore, and we are in heaven.

Rocking On The Beach has taken the classic rocking chair and given it the capacity to produce its own soothing nature sounds, other than squeaks and creaks.

Looking like the lovechild of the tin man and a rocking chair, it has sand in its runners to create a gentle `whooshing' noise, which is projected out of speaker-like openings as the chair rocks back and forth, thus mimicking the sounds of the beach.

Thursday, May 13, 2010

Latest Property News from Ted Hanson

Friday 14 May 2010
Australia's Biggest Morning Tea - Thursday 27 May

Australia's Biggest Morning Tea is one of Cancer Council's leading fundraising events and the largest, most successful event of its kind in Australia. Over $70 million has been raised since it first began in 1994.

The concept is simple, host a morning tea for your friends or workmates and raise funds to help the fight against cancer.

Southern Estates will be hosting morning tea at our office at 98 Market St, Wollongong on Thursday 27 May at 10:30am. We would love for you to come along and join us for a warm cuppa, a delicious assortment of cakes and great company!

By taking part you can help Cancer Council support the 1 in 2 Australians who will be diagnosed with cancer before the age of 85

Please let us know if you can make it by either emailing Nicki at or simply phone our office and leave a message with our fabulous Receptionist Tamsyn.

We look forward to seeing you soon!

Approvals lift game

A spike in the more volatile `other dwellings' component that includes apartments and townhouses has driven a big increase in dwelling approvals in March, according to figures released this week by the Australian Bureau of Statistics.

The number of `other dwellings' approved rose by almost two-thirds (59.9 per cent) in March 2010 to be up 56 per cent on March 2009.

The total number of dwelling units approved, seasonally adjusted, rose by 15.3 per cent to 16,383 in March. This is 51.6 per cent higher than the same month in the previous year.

Private sector house approvals rose by 0.5 per cent to 9,779 to be up 29.7 per cent on the same month last year.

Master Builders Australia, Chief Economist Peter Jones commented that it looks as though investor-driven activity may at last be starting to overcome the lingering effects of the credit squeeze.

"The Government's social housing stimulus spending is helping, with public sector approvals up almost tenfold on levels of a year or so ago", Jones said.

Public sector dwelling units rose by 25.6 per cent in March, to be 496.5 per cent higher than the same month last year.

New code for dispute resolution

From 1 July 2010, Australian consumers will have much greater access to free, independent external dispute resolution services when they have a problem with their credit provider or broker, following the release of updated regulatory guidance from ASIC.

The new dispute resolution requirements for credit will deliver assistance to consumers who are in hardship or financial difficulty.

For example, a lender's contact details for making a hardship application (i.e. telephone number, and where possible, a fax number, postal address and email address) will be posted and kept updated on an external dispute resolution (EDR) scheme's website.

It is expected that this will assist consumers and their representatives to find out where to direct a hardship application.

There will also be quicker response times for the handling of urgent credit disputes by the credit licensee's in-house complaints handling process.

Instead of the current maximum 45 days for handling disputes internally, lenders will have shortened timeframes for handling certain types of credit disputes. For instance, for disputes involving default notices there will now be a maximum 21 days.

ASIC will review the dispute resolution requirements once the new national credit regime has had a sufficient time in operation.

Investors fill in the blanks

Investors are returning to the property market in droves, mortgage broker AFG reported this week.

AFG's latest Mortgage Index shows that while mortgage sales fell by 15.6 per cent between March and April this year, the proportion of investors surged as owner-occupiers dropped off.

Property investors accounted for 36.9 per cent of all mortgages arranged in April, the highest
such figure AFG has ever recorded.

This compares with 10.2 per cent for first home buyers and 16.3 per cent for up-graders. The balance of new mortgages in April (36.6 per cent) was arranged for refinancing purposes.

AFG Mortgage Index shows that the $2.7 billion of mortgages arranged nationally in March fell to $2.3 billion in April. This figure is also 17.5 per cent lower than the $2.8 billion arranged in April 2009.

NSW saw the largest decline of 19.9 per cent from March sales, with QLD falling 16.4 per cent, SA 15.9 per cent, WA 14 per cent and Victoria the most robust with an 8.7 per cent fall.

Mark Hewitt, General Manager of Sales and Operations for AFG attributed the growing number of investors to the fact that investors tend to be more insulated from fluctuations in interest rates.

"They may have the option of rent rises or negative gearing to protect them", Hewitt said.

"This is why we're seeing the emergence of a two-tier mortgage market."

AFG Mortgage Index shows that Loan to Value Ratios, the value of a home loan expressed as a percentage of the value of a property, was 63.3 per cent in April, compared with 73.7 per cent in April 2009.

This reflects the growing proportion of relatively well-funded investors as well as the decline of first home buyers over the past 12 months.

Where the rich get richer

Things have been tough for many US homeowners in the past few years, but hard times don't seem to have affected the fabulously wealthy, according to Forbes Magazine's latest list of America's most expensive homes.

Forbes reports that this year the most expensive homes on the market are commanding even higher prices, on average, than last year, with a price range between $65 million to $150 million.

Top of the list at an astounding US$150 million is Candy Spelling's English-style mansion, aptly named The Manor. The 56,500 square-foot (5248 sq m) house has a bowling alley, wine cellar, rooms for gift-wrapping and silver and china displays, a library, gym and media room.

Its 4.6 acres includes pools, spa, landscaped gardens, a waterfall and parking for over 100 cars.

Just down the street and slightly less costly at $125 million, is Fleur de Lys, a 35,000-square-foot home reputed to be modeled after the Palace of Versailles. No mention of a Hall of Mirrors, but apparently it does have gold-embossed leather walls.

$100 million will buy you a 210-acre spread with 20,000-square-foot main house with art studio, sports gym, golf course, boathouse and views of Lake Tahoe. Still belonging to Tommy Hilfiger co-founder Joel Horowitz, it has been on the market for almost four years with no likelihood of dropping the price.

Three coastal parcels in Hawaii combined make up a 5.5-acre property that is one of the country's most expensive (at $80 million). The island getaway offers coastal views and a 12,000-square-foot boathouse and marina that are almost as big as the 15,000-square-foot home.

If you can't quite raise 80, then $75 million will see you the proud owner of Humming Bird Nest Ranch in California. Set on 123 acres, it has a 17,000-square-foot main house, six guest homes, 10 townhouses, as well as a fully equipped equestrian centre and parking for 200 vehicles. If driving doesn't suit you, there's also a helicopter pad.

Alternatively, $75 million could buy you a New York townhouse off Fifth Avenue or Porcupine Creek in California, which features a 19-hole course that won acclaim from Golf Digest magazine.

Forbes Magazine said they limited the list to homes on the public market which could be verified, as some high-priced sales are `closed-door' transactions.

Home with a throne, sand and foam

Public toilets aren't places we like to stay for too long, let alone spend a night, however one UK couple has managed to see past the muck and mire and right into beachfront views.

The two spotted the potential in a dilapidated public lavatory that had been used for almost a century before being closed in the 1990s, the UK Telegraph reports. Extensive renovations inside make it possible to forget the place where the TV sits was once the men's urinals, or the bedroom and bathroom was once the ladies' toilets.

Not only do they now have a home sitting right on a tourist-hot-spot beach, but the property is in the lowest band for council tax and the couple have a permit to park across the road.

House of shadow puppets

Concrete has had its fair share of tough times, and not many opt for the rigid and cold-to-touch material when planning walls for their new home. But a new range of concrete has a lighter approach to banish it from the shadows.

Litracon - light transmitting concrete - is filled with optical fibres that run from one end of the poured concrete slab to the other, effectively transmitting colours and light with a natural, soft silhouette appearance. The fibres can transmit light to over 50 feet and only make up a small percentage of each piece so do not significantly affect the structural capabilities.

Wednesday, May 12, 2010

New tax on property under fire

Media reports indicate that the State Government has just announced a new ad valorem tax on property transfers. 0.2% on the purchase price for properties between half a million and a million dollars increasing to 0.25% in excess of $1m. This new tax is in addition to the existing stamp duty on conveyances contained in the NSW budget to be announced in June and commencing 1 July 2010.

AAP reports the following: May 12, 2010 - 4:27PM The NSW opposition is accusing the state government of using the federal budget as cover to sneak through a new property tax. Lands Minister Tony Kelly announced in parliament today that the government will introduce new charges on transfers of properties valued at more than $500,000, as part of a plan he says will prevent fraud. Ad valorem fees of 0.2 per cent will be charged for properties worth between $500,000 and $1 million, and 0.25 per cent for properties valued above $1 million.
However, the first $500,000 will be fee free, making the payment on an average Sydney home of $600,000 about $200.

"The new security measures will strengthen land title examination processes and will include an additional six authentication measure such as a new watermark and a security trust seal tailored specifically for certificates of title," Mr Kelly said.
The NSW opposition immediately seized on the announcement, accusing the government of trying to sneak through the new tax before next month's Penrith by-election."This is an attempt under the cover of a federal budget to get some bad news out from the state budget, well away from polling day in Penrith," he said.

"This is a tax on home buyers, this is a tax that is going to hurt the property market."
Shadow treasurer Mike Baird says claims the scheme will prevent property fraud are "complete spin".

"Whatever way you dress this up, it is not Cinderella at the ball, it is an ugly dirty tax," he said.Whatever way they try to do it, it will not hide the fact that this is a tax on homes, it's a stamp duty by any other name."

Premier Kristina Keneally defended the changes in question time, saying "70 per cent of property registrations will remain unaffected by the ad valorem charges".
"Western Australia, Victoria, Queensland and South Australia all have ad valorem fees on transfers," she said.

"The proposed ad valorem rates maintain NSW as middle ranking in government land transfer charges."If passed by parliament, the new charges would come into affect in July.
The fees are expected to raise about $90 million annually.

Australia's Federal Budget 2010/11 - Making Sense of it

The Federal Budget is hardly the most riveting document you are ever likely to read. Sure you know it’s important, but the problem is that it’s a huge document with countless facts, figures and tables. And when it comes to analysis, economists seem to be writing for other economists; and accountants writing for other accountants.

It’s always important to remember that it is just a budget, the same that any household or company would prepare. Assumptions are made; forecasts are taken. And sometimes they can go awry – remember last year Treasury thought we were headed for recession, while unemployment was expected to hit 8.5 per cent. We didn’t experience a recession and unemployment peaked at 5.8 per cent.

At the end of the day most people want to know what’s in it for them. It doesn’t matter whether you are a student, pensioner or CEO of a major company.

So we have decided to make this analysis different.

Sure, there are the usual tables, graphs, facts and figures. But we reckon that there are only three questions most people want answered and that’s where we will be concentrating:
• Did the Government get it right?
• What does it mean for Australia?
• Who are the winners and losers?

First things first
• This year (2009/10) the budget deficit is tipped to hit $57.1 billion (4.4 per cent of our economy or GDP). Last November, a deficit of $57.7 billion was expected.
• Next year (2010/11) the deficit is tipped to be $40.8 billion (2.9 per cent of GDP), better than the $46.6 billion deficit forecast six months ago.
• The budget is expected to return to surplus three years early in 2012/13.
• Most of the measures have been previously announced: Health fund reform; company tax cut; resources super profits tax; increase in super fund levy and personal tax cuts.

Did the Government get it right?
• The Government believes that a no-frills, no-nonsense budget is required. We beg to differ. Australia was successful in avoiding recession last year and, unlike other advanced nations, is not weighed down by huge deficits and debits. We should be building on that success. Spending should be cut, not curbed, so that the Reserve Bank – and home-buyers – don’t have to shoulder the burden.
• But policy decisions since November last year increase the deficit by $3 billion. The Budget deficit is tipped to improve by over $16 billion next year, but none of the improvement is due to Government efforts. The deficit is expected to improve by over $31 billion in 2011/12 and only $600 million of that is due to Government.
• The Henry Tax Review has been handed down but the Government has only opted for only a handful of the 138 recommendations. But where the Government deserves credit is to show some discipline on spending. (Effectively it’s promised a lot, but nothing happens any time soon). So we give the Budget a mark of: 13/20.
• Of course, we have to take a moment to focus on the budget setting. Last year the budget was set against the background of the global financial crisis. One by one, major economies were slipping into recession, and while our government tried to protect our economy as much as possible, policy-makers seemed resigned to the fact that we would probably go down the same path.
• The Government spent freely by way of cash hand-outs; tax breaks for businesses; home insulation schemes; spending on schools; and building social housing. As a result the budget moved from a surplus of almost $20 billion to a deficit of just over $47 billion. The Reserve Bank slashed interest rates from 7.25 per cent to 3.00 per cent. And it worked – Australia avoided recession.
• Of course the fact that we did so well then caused some to argue that we spent too much and cut rates too far. Hindsight is a marvellous thing. But it seemed like the right idea at the time. Of course not all the money was well spent, but that’s another story.
• This year the budget has been set against the background of a domestic economy now doing perhaps a little too well. The Reserve Bank has been active in winding back the stimulus, lifting cash rates 1.5 percentage points in just eight months. There have been concerns that we are witnessing Mk II of the commodity boom, with consequences for economic growth and inflation in Australia.
• But in the last few weeks, the positive sentiment has been dented by the European debt crisis (EDC). Could this be the second act of last year’s financial crisis, leading to ‘W’-shaped economies? That is, many countries recorded ‘V-shaped’ recoveries, but are they now headed south again?
• We would argue that our economy remains in strong shape; that China will continue to expand strongly; that Greece won’t de-rail the global economy; and that the US economy is on the path to recovery. On that basis, the Government should be winding back stimulus to the economy.
• The Government has given a commitment not to increase spending by more than 2 per cent in real terms until the budget surplus is more than 1 per cent of GDP.
• But while the government is to be applauded for its commitment to restrain spending growth, it has been lazy in other areas of fiscal (budget) policy.

What does it mean for Australia?

• Managing the economy is very much a balancing act. The Reserve Bank has a role by setting interest rates (monetary policy). And the Government has a role in deciding what to spend, where to spend and how to pay for it (fiscal policy).
• You can’t have one arm of policy moving one way, and the other arm of policy moving the other way. But that is very much that situation. The Reserve Bank has been winding back stimulus and now arguably monetary policy is neutral – not boosting or slowing down the economy.
• Given that monetary policy alone is controlling our economy, we believe the cash rate will have to rise further over the coming year to around 6 per cent by the end of next year.
• Over the coming year, the budget deficit is expected to improve by around $16 billion or just over 1 per cent of GDP. But all of that will come by natural means or the “automatic stabilisers” – more employment, so less unemployment benefits and more taxes; and higher company profits, so again more taxes. But the government isn’t doing anything to improve the bottom line. That is, there is little in the way of discretionary measures to cut spending or boost revenues.
• Still, it is an election year. To what extent could we reasonably expect the Government to slash and burn in this environment?

Who are the winners & losers?

• Low-income earners: There is another round of tax cuts. But even for those on $50,000 a year it works out at just an extra $5.77 a week. Tax simplification and less tax on bank deposits – but you’ll have to wait. Workers under $37,000 get extra $500 in super.
• Middle-income earners: Someone on $100,000 a year gets an extra $9.62 a week from July 1 via tax cuts.
• High-income earners: Those on $150,000 a year get a tax cut of $19.23 a week.
• Pensioners: No change. Cheaper medications from health fund reforms.
• Investors: Most investors hope for a satisfactory negotiation between the Government and miners on the super profits tax.
• Companies: Nothing in the short-term. Small business gets a tax cut from July 2012.

Craig James, Chief Economist, CommSec

Thursday, May 6, 2010

Latest Property News from Ted Hanson

Friday 07 May 2010
Quote of the week

24 golden hours

"Every morning you are handed 24 golden hours. They are one of the few things in this world that you get free of charge. If you had all the money in the world, you couldn't buy an extra hour. What will you do with this priceless treasure? Remember, you must use it, as it is given only once. Once wasted you cannot get it back." - Author Unknown -

Wanted: 3.2 million homes

Australia is going to need 3.2 million more homes over the next 20 years, according to the National Housing Supply Council's (NHSC) 2nd State of Supply Report.

This will require over 180,000 new dwellings being built each year, which the Council acknowledges may be a problem given the shortfalls over the past few years.

The report shows that the gap between demand and supply increased from 99,500 dwellings at June 2008 to 178,400 dwellings at June 2009.

The Housing Industry Association (HIA) says this gap, between the number of homes being supplied and the number needed, increased by 78,800 dwellings during last financial year alone and is projected to exceed 300,000 dwellings by 2014.

The NHSC recommends that "increased housing supply (including within existing urban areas) would be assisted by reform of planning governance, clarity and consistency in the basis for developer charges and mechanisms to ensure the implementation of urban strategic plans, including the delivery of infrastructure."

HIA Chief Executive, Association, Graham Wolfe, said that the Council's projections were close to those recently developed by the HIA and reiterated the report's suggestion that these numbers should represent a call to action for all levels of government.

But it is not just about planning and governance. Australia's ageing population is also affecting housing demand, the report found.

Households with residents aged over 65 years are projected to double from 1.6 million to 3.2 million households over the next two decades, indicating the increased demand for dwelling types better suited to the needs of older people.

House prices rise 20 per cent

House prices have risen five per cent in the first quarter of 2010 and twenty per cent over the past year, according to figures released this week by the Australian Bureau of Statistics.

This is the largest annual increase since the series began in the March quarter of 2002.

The highest jump was recorded by Melbourne, where quarterly prices rose by 6.7 per cent and annual prices by 27.7 per cent. Sydney followed close behind, recording 5.3 per cent quarterly growth and 21 per cent over the year.

The strongest growth in these two cities came from established houses with relatively high prices.

There were also positive contributions over the March 2010 quarter from Perth (up by 3.5 per cent), Brisbane (up 2.0 per cent), Adelaide (2.7 per cent), Canberra (5.4 per cent), Hobart (4.2 per cent) and Darwin (3.6 per cent).

Annually, house prices rose by more than 10 per cent in all other capitals. Canberra recorded a jump of 20.6 per cent, Darwin 17.5 per cent, Perth 15 per cent, Hobart 14.1 per cent, Brisbane 12.1 per cent and Adelaide 10.8 per cent.

Third Strike

At its meeting this week, the Reserve Bank decided to again raise the official cash rate (OCR) by 25 basis points, taking it to 4.5 per cent - its highest level since the end of 2008.

There is now speculation that there will be no further increases in the near future, as this move brings the OCR to about its average level.

Reserve Bank governor Glenn Stevens said in his statement announcing the decision that inflation has not fallen as far as earlier forecast, and now appears likely to be in the upper half of the target zone over the coming year.

"With the risk of serious economic contraction in Australia having passed some time ago, the Board has been adjusting the cash rate towards levels that would be consistent with interest rates to borrowers being close to the average experience over the past decade or more", Governor Stevens said.

"The Board expects that, as a result of today's decision, rates for most borrowers will be around average levels.

"This represents a significant adjustment from the very expansionary settings reached a year ago", he added.

Doors open on zero-emission home

Designed to fit the Australian climate and the lifestyle of a typical middle-income family, Australia's first Zero Emission House (AusZEH) was officially opened last week in Melbourne.

The eight-star energy-efficiency rated AusZEH showcases off-the-shelf building and renewable energy-generation technologies, and new future-ready energy management systems.

Nearly 13 per cent of Australia's greenhouse gas emissions are due to home energy use.

The AusZEH is designed to produce enough `zero-emission' electricity from 6kw solar panels to supply all the operating energy needs of the household so that its net total CO2 or other greenhouse gas emissions is zero.

The demonstration house was designed and built by the CSIRO, in conjunction with industry partners Delfin-Lend Lease and the Henley Property Group and supported by the AusZEH consortium.

The Director of CSIRO's Energy Transformed Flagship, Dr Alex Wonhas, says the uptake of zero-emission housing in Australia could have a significant impact on reducing emissions nationwide.

"CSIRO scientists estimate that if all the new housing built in Australia between 2011 and 2020 were zero-emission houses, 63 million tons of greenhouse gas (GHG) emissions would be saved," Dr Wonhas said.

"This would be equivalent to taking all of Australia's private cars off the road for two years and 237 days, or closing all Australia's power stations for up to 100 days."

CSIRO's Energy Transformed Flagship initiated the AusZEH project to demonstrate and evaluate how low-carbon housing can be achieved in Australia to reduce GHG emissions and create a more sustainable future for the nation.

For 12 months, the AusZEH demonstration house will become a home for an Australian family and a laboratory for CSIRO.

The house has been fitted with a unique energy management system developed by La Trobe University in partnership with CSIRO, which tracks energy use in the house and provides feedback via customised reports to household members.

This information on the performance of the `living' house will be used to identify ways to improve the design of future zero and low-emission houses.

Back up on the shelf

Shelves seem to share the plight of tables and couches - if they aren't specifically used, they quickly become storage space for items that shouldn't be there. Inspired by the decorative appeal of a musical score and the functionality of the old computer punch cards, the Hook Wall shelving system allows you to add and remove segments of shelf at whim. But wait, there's more...

The custom-made corrugated metal `wallpaper' has strips of holes that support decorative shelves, art etc, while also functioning as a sound-absorbing partition wall and controlling indoor temperature through a hidden built-in radiant heating and natural cooling system.

Hooked on free energy

Life is worth more than a power bill, though that can be easy to forget when you're hooked into a crazy scheme.

German authorities are investigating a local man who hatched a plan to steal electricity after the power company cut him off, according to the UK Metro.

A serious contender for the Darwin Awards - commemorating individuals who further humanity by removing themselves from the gene pool in outrageous ways - the man attached a cable to a meat hook and threw it onto an overhead powerline, drawing power from the transmission line to his home 150 metres away.

The bootleg scheme was only discovered during a routine check. An employee of the utility company issued a warning with hopes of deterring copycats from trying it, saying it could kill you.