Will SMEs back Gillard?

While Julia Gillard's decision to challenge for the leadership of the Australian Labor Party has shocked no one, the speed at which support for Kevin Rudd evaporated was staggering.
Just a few days ago, Gillard was emphatically ruling out a try at the top job. This morning, after a lightening move from the ALP's Right faction, she is now Australia's first female Prime Minister.While questions will be asked about whether factional heavyweights should have as much power over the ALP – and for now at least, the Government – as they clearly do, it is equally obvious that the ALP had to move.Rudd simply had lost traction with the electorate. The negative momentum probably started with his decision not to proceed with the emissions trading scheme – an issue he famously described as "the greatest moral challenge of our time" – and gathered pace with the botched insulation scheme, the school buildings program and the Government's stance on asylum seekers.A $15 billion health reform didn't give Labor a boost in the opinion polls and the poorly-handled introduction of the Resources Super Profits Tax apparently sealed Rudd's fate.Of course, Rudd is now yesterday's man.The big question now is: can Julia Gillard lead Labor to a win in the Federal Election?Gillard obviously has a better chance than Rudd, and is likely to enjoy something of a honeymoon period with voters in the coming months. This will probably give Labor a good deal of momentum leading into the poll – this may also make it difficult for the Coalition to get its message through to voters.But Gillard may still find it very difficult to win over the SME community due to one key reasons – industrial relations.As the architect of the Fair Work IR regime, Gillard is perhaps the minister who has had the biggest direct impact on SMEs since the Rudd Government's election in 2007.Under this regime, we have seen the removal of unfair dismissal protections for thousands of businesses, new enterprise bargaining rules, new workplace flexibility rules for employees, and mass confusion over Gillard's Modern Awards system.The change from the Howard Government's Work Choices regime to the Fair Work regime has been complex, confusing and costly for many entrepreneurs and the worst may still be to come – many of the new Modern Awards start on July 1, as Gillard's prime ministership is just getting underway.Gillard and the Government rightly argued that Work Choices pushed the IR balance of power too far towards employers, but many entrepreneurs and employer groups believe Fair Work has pushed the pendulum back too far the other way.Gillard's stint as Prime Minister may we be very short if SMEs decide they simply cannot vote for the architect of the Fair Work regime.Source Smart Company www.smartcompany.com.au

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Friday 25 June 2010 Quote of the Week It is important to keep the promises made to friends. This is the true meaning of friendship. To become people who can do so, however, we must first learn to keep the promises we have made to ourselves. 1. Investors arrest slowdown Price growth for residential properties may slow down in 2010, but investors will keep interest alive in the market, according to industry analyst and economic forecaster, BIS Shrapnel. According to the company's Residential Property Prospects, 2010 to 2013 report, lending activity is already easing, with first-home buyer demand in the March quarter of 2010 down by 44 per cent on the same period last year and `upgrader' activity plateauing. This is flowing through to softer demand for residential property. BIS Shrapnel senior project manager and study author, Angie Zigomanis, says a combination of factors have caused the momentum that built up in house prices in the second half of 2009 to stall in 2010. "The strong price growth in the second half of 2009 was a rapid adjustment to housing variable interest rates that were at 40-year lows," says Zigomanis. "With interest rates quickly lifting from these `emergency' levels, and the current variable rate of 7.4 per cent now being close to long term trends, the recent levels of price growth cannot be maintained." BIS Shrapnel does not expect house prices to fall, however. Investors are beginning to return to the market and pick up some of the reduction in owner-occupier demand - loans to investors were up by an annual 26 per cent in the March quarter of this year. While rental growth did slow in 2009, part of the slowing was due to first-home buyers moving from rental to owner-occupation, as well as the lower interest rates reducing the incentive for landlords to pass on further interest rate rises. "Even though overseas migration inflows are steadily easing, a deficiency of stock is still in place with dwelling construction below underlying demand," says Zigomanis. "This is expected to put pressure on vacancy rates and result in stronger rental growth later in 2010. The deficiency of dwellings, and improved rental picture, will continue to maintain investor demand and assist prices. "In addition, the current round of interest rate rises is expected to have run its course, with further rises expected to be more moderate," adds Zigomanis. "Our forecast is for the cash rate to increase by 50 basis points in 2010/11, and a further 50 basis points in 2011/12. The more stable interest rate environment is expected to underpin purchaser confidence as economic conditions continue to strengthen, and should continue to push through moderate house prices rises." In effect, the surge in prices in the second half of 2009 in most cities has `front loaded' price growth in this upturn, leading to a flatter cycle in prices as the economic recovery continues. Higher interest rates will maintain price growth at a more moderate level, despite the acceleration in economic growth driven by the recovery in resources investment. "Normally price growth is moderate at the beginning of the upturn and accelerates to a peak at the end of the cycle as economic growth also peaks," explains Zigomanis. "However, the very low interest rates in 2009 initiated stronger rises, so the sharp 1.5 percentage point rise in the cash rate between October 2009 and May 2010 has already begun to strain affordability, causing future price growth to be more muted." Among the state capitals, BIS Shrapnel forecasts those starting from the lowest price base will experience the most solid price growth. Real house prices in both Sydney and Perth are still below their previous peak levels, and this should underpin stronger growth relative to the other capitals. Price levels in Adelaide are below the other mainland capitals. More moderate growth is expected in Brisbane, Hobart and Canberra due to weaker underlying demand and local economic conditions over the next three years, while the very strong price rises in Melbourne and Darwin have pushed affordability and will limit further rises. 2. Darwin tops sustainable cities index Darwin and Brisbane are better than the other capitals, but no Australian city has done well in the Australian Conservation Foundation's (ACF) first sustainable cities ranking. ACF's Sustainable Cities Index tracks the progress of Australia's 20 largest cities across 15 indicators: air quality, ecological footprint, green buildings, water, biodiversity, health, density, wellbeing, transport, employment, climate change readiness, education, food production, public participation and household debt. Darwin scored well with clean air, strong biodiversity and low levels of unemployment and household debt, but lost marks on health and preparedness for climate change. Perth came last on the list because of a very high ecological footprint per person and the amount of water supplied to houses relative to annual rainfall. While Perth's public transport system is better than many cities', it still scored poorly on transport with 641 private vehicles for every thousand people. Melbourne came seventh; Sydney was twelfth. Most cities were clustered around the middle of the scoring range. "Australia's major cities consistently rate among the most liveable, but liveability is not the same as sustainability," said ACF executive director Don Henry. "Australians use more water and energy and own more cars per person than the citizens of almost any other developed country. "Many decades of being wasteful with resources, combined with booming population growth, poor planning and a lack of infrastructure investment has come at a real cost to our economy, society and environment. "Our cities could be transformed into clean, efficient places with great public transport and happier, healthier residents. "In this federal election year it's up to our political leaders to prove they have the plans to deliver world class public transport systems, clean up Australia's vehicle fleet and make our cities truly sustainable." 3. Money for `Cool Ideas' Architects, building designers and specifiers are being asked to submit their 'Cool Idea' for a thermally-efficient workplace in a new competition that could win them a cool A$20,000. The competition was launched by BlueScope Steel at DesignEx in April in conjunction with the launch of BlueScope Steel's latest roofing product, Colorbond® Coolmax™ steel, which has been found to considerably reduce the annual cooling costs of a building. Already over 130 entries have been submitted. The 'Cool Ideas' competition runs until 30 November 2010. The judging panel comprises Justine Clark, editor of Architecture Australia; Bill Tikos, editor of The Cool Hunter and Adam Haddow, director of SJB Architects and winner of the 2009 Property Council Future Leader Award. To enter or to view submitted entries, visit www.colorbond.com/coolmax and in 25 words or less, tell BlueScope Steel your cool idea for creating a more thermally efficient building. 4. Tax time: invest in your property strategy In the lead up to a new financial year, Australia's largest independently-owned mortgage broker, Mortgage Choice reminds existing and potential property owners to make the most of their tax return. A great way for all residential market players to get ahead is to legitimately maximise any tax deductions before 30 June. Homeowners should also consider placing the resulting tax return directly into their home loan, while those looking to achieve home ownership status should contribute it into their deposit account. Investors may find a better use, depending on their goals. Mortgage Choice senior corporate affairs manager, Kristy Sheppard said that the end of the financial year presents an excellent opportunity to reassess your position and determine what strategies are available to you and how these can be used to benefit your property plans, being a time when many people consult their accountant and/or financial advisor for an annual financial health check. "Investors will be exploring tax deductions for their rental property or properties", Ms Sheppard said. "For example, you may be able to claim expenses such as outlay for travel to inspect an investment property, cost of advertising to attract a tenant, agent and/or management fees, body corporate fees, council rates, gardening, pest control, repairs and maintenance, water costs, home loan fees and loan interest. "For many, the potential tax benefits of negative gearing are the greatest lure to property investment. Negative gearing occurs when the combination of annual interest repayments plus any deductible expenses is higher than annual rent received from tenants. This allows eligible property upkeep and loan costs to be deducted from your gross income. Then you are taxed only on that reduced income. "This is especially popular with high income earners and those with larger loans, as the more money borrowed to buy a property, the more interest is owed, and therefore the bigger the possible tax deduction. For this reason and more, it is a good idea to consult a reputable tax adviser and mortgage broker before choosing a home loan and buying a property, to learn about the tax deductions available on your potential investment and what loan type suits your long-term strategy. "Moving on to prospective investors and homebuyers keen to enter the market, tax time presents a great opportunity to put a tax return to good use for the upcoming property purchase. "Firstly, lenders have tightened assessment criteria and now require borrowers to contribute higher genuine savings deposits accumulated or held over a period of three months or more. This is often 5% of the purchase price for homebuyers and up to 10% for investors. Keep in mind, equity from an existing property may be considered as genuine savings. So, it is worth considering assigning your tax return to a high interest savings account to reap the eventual benefits on your deposit amount. "Secondly, you may use your tax return to pay off other debts that feature a higher interest rate, so you have less debt when the time comes to apply for a home loan or mortgage top-up. "If you are already repaying a home mortgage, you may choose to contribute your return as a lump sum payment. Repaying your mortgage quicker speeds up the accumulation of your equity and reduces the length of the loan term and interest owed over that term. "If a borrower with a $300,000 home loan at 7% p.a. who is five years into their 30-year loan term contributes a lump sum payment of $500, they will save around $2,359 in interest plus one month off the loan term. However, if they did this every year, dividing the return by 12 and paying it each month over the entire term, they will save around $19,961 in interest plus 16 months. "Whatever your status, it is important to consult experts and ensure your decision is well thought out", she concluded. 5. Burger the candle at both ends While most fast food restaurants rely on visual images and past experience to draw people back to the counter time and time again, one savvy burger chain in the US has found a way to bring tantalising advertisements into homes via a different sense. Famous for their miniature burgers, White Castle are now offering burger-scented candles. Served up in a rectangular ceramic holder in the likeness of a box the burgers come in, it's one ad you can't avoid by changing the channel. According to NY Daily News, net proceeds will be donated to a charity for Autism. 6. Can an offer be too low? As a purchaser, you might feel a property is worth less than the asking price, based on your knowledge of past sales, available properties, condition, location, siting, design, etc. But how do you know what the seller will accept unless you make an offer? Remember, a real estate transaction is basically a business deal - you make an offer, then if it is rejected, at least it's a starting point for both parties to negotiate.

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Friday 18 June 2010 Quote of the week... It's only when we truly know and understand that we have a limited time on earth -- and that we have no way of knowing when our time is up -- that we will begin to live each day to the fullest, as if it was the only one we had. - Elisabeth Kubler-Ross 1. Investor loans rising Loans for investment housing continued to rise in April, according to dwelling commitments figures released this week by the Australian Bureau of Statistics. Investment loans for new housing increased 9.1 per cent over the month, assisting total investment to rise by 1.3 per cent. Loans for the purchase of new dwellings grew by 6.3 per cent in April, however the number of loans for construction fell by 4.8 per cent. Overall, loans for new housing dropped by 1.8 per cent to be 25 per cent lower than six months ago. Over the 3 months to April 2010 total housing loans dropped by 20.8 per cent compared to the same period in 2009. First home buyer loans were down by 51.4 per cent, while trade-up buyer loans fell by 8.6 per cent. In seasonally adjusted terms the total number of owner occupier loans in April 2010 fell by 0.7 per cent in Victoria, 3.1 per cent in Queensland, 1.9 per cent in Western Australia, 0.2 per cent in the ACT, and 8.6 per cent in the Northern Territory. Loans increased by 0.4 per cent in New South Wales, 3.8 per cent in South Australia, and 2.7 per cent in Tasmania. 2. Good time to buy a home We may be a little apprehensive about the way the global economy is going but are more than happy to buy a house, according to a recent survey of consumer sentiment. The Westpac-Melbourne Institute Consumer Sentiment Index fell by 5.7 per cent in June from 108.0 in May to 101.9 in June. But that's not because we're worried about rising interest rates, apparently. Westpac's Chief Economist, Bill Evans, commented that the result seems to reflect a mixture of concerns about deteriorating conditions abroad, financial market turmoil and uncertainty around the Government's proposed Resource Super Profits Tax. "The spending intentions measures in this survey have been quite resilient", Mr Evans said. "The component `whether now is a good time to buy a major household item' is only down 5.6 per cent over the last two months and in this survey other `time to buy' questions posted partial rebounds." `Time to buy a dwelling' rebounded 7.3 per cent from its 15.4 per cent slump in May and `time to buy a car' rebounded 1.6 per cent from a 6.4 per cent fall in May. Mr Evans does not expect that interest rates will rise in the near future. "The Reserve Bank Board next meets on July 6. "Clearly we are not changing our view that rates will remain on hold following that meeting", he said, adding that the next significant meeting will be on August 3, after the Board will have received an update on inflation. The survey found that consumers' short-term outlook for the economy improved in June, with expectations for `economic conditions over the next 12 months' rising 2.8 per cent. 3. Australia's building hotspots Victoria is the nation's biggest building hotspot, according to a new report from the Housing Industry Association. The Population and Residential Building Hotspots report provides a snapshot of Australia's fastest growing metropolitan and regional areas in the 2008/09 financial year. A "hotspot" is defined as a local area where population growth exceeds the national rate and the value of residential building work approved is in excess of $100 million. The nation's top local building hotspot was Whittlesea North in Victoria where residential building work approved rose to over $484 million and the population growth rate was 18.3 per cent. The national population growth rate was 2.1 per cent. Next on the list was another of Victoria's fastest-growing cities, Wyndham South, where the value of work hit almost $284 million and the population growth rate was 12.8 per cent. Griffin-Mango Hill in Brisbane, Queensland took third place with almost $150 million worth of residential building work approved and a population growth rate of 12.8 per cent. HIA Chief Economist Harley Dale remarked that the 2008/09 financial year was a very challenging one for Australia's new home builders and renovators with a sharp fall in new home starts and a moderation in renovations activity. "At the same time, Australia's population was growing at a historically fast 2.1 per cent pace", Dale said. "Meanwhile, very low interest rates and assistance to first time buyers targeted to new homes created the conditions for a first stage housing recovery in 2009/10. "Last year there were 58 local area hotspots across Australia's states and territories and these areas have experienced healthy new home building and renovations activity in 2009/10," he added. Among the Top 20 National Building and Population Hotspots are Wanneroo in WA, Ipswich, Caloundra and Inner City Brisbane in Queensland and Whyndham, Casey and Melbourne's Docklands in Victoria. The only area in NSW to make the list was Canada Bay/Concord in Sydney. 4. Wrap it up, Daddy long-legs How often do you clean up cobwebs in the house, only to find they are back again in a few days? And the culprit is almost always a Daddy-long-legs spider, isn't it? But before you get the broom out to remove the perpetrator once more to the outdoors, take a moment to consider his role in removing the other spiders which might otherwise invade your house. According to Backyard Buddies - a website initiative of the Foundation for National Parks & Wildlife - Daddy-long-legs are adept at catching, wrapping and killing the much larger Huntsman spiders, Redback spiders and Funnel-web spiders. Their not-so-secret weapon is their extremely long legs. When another spider passes by, the Daddy-long-legs can simply reach down and haul the more dangerous (but shorter-legged) spider into its web. It then wraps its prey up before it can get close enough to harm the Daddy-long-legs. Once the more deadly spider is immobilised, it is easy to bite and kill. So Backyard Buddies concludes that while their messy webs might make the Daddy-long-legs appear un-neighbourly, they might well be preventing far more undesirable spiders from taking up residence in our homes. 5. Farmers having a blast Just like Daryl Kerrigan in the iconic Australian movie The Castle, a Chinese farmer has brought in the big guns to defend his castle from encroaching developers. Since February, the 56-year-old farmer living on the outskirts of Central China has foiled two attempts by property developers to move him off his land, scaring off demolition crews using a home-made cannon to fire makeshift rockets at those looking to flatten his home, China Daily reported recently. Almost all the nearby farmland has been requisitioned for government building and although the man had been offered around AU$22,000, he is said to have demanded almost 5 times the amount and is clearly willing to fight for it. 6. Grow your own chair For centuries trees have been cut down to be made into furniture - until now. Instead of being uprooted and re-processed, the trees in Swiss designer Michel Bussien's Growing Chair evolve right before your eyes, growing into the structure of a seat with their roots in your own yard. Willow trees grow from each leg within glass chair-shaped confines, with Russian vine wrapped around the living structure for added greenery.

Confidence slides; Investors prop up property

Consumer sentiment; Housing Finance
• The Westpac/Melbourne Institute consumer confidence index fell by 5.7 per cent in June – marking the third consecutive month of falls. In annual terms confidence is up just 1.7 per cent on a year ago.
• Over the past three months confidence has fallen by 13.7 per cent - the biggest quarterly fall since the period following collapse of Bear Stearns (April 2008).
• New home loans fell for the ninth time in ten months in April, down by 1.8 per cent. The number of loans to owner occupiers fell to the lowest level in 9 years. The average home loan across Australia stood at $286,900, up 7.6 per cent on a year ago.
• The value of investment loans rose for the second consecutive month up by 1.3 per cent in April. In annual terms investor finance is up 26 per cent on a year ago.

What does it all mean?
• Aussie consumers are sharply reigning in the exuberance that was evident earlier in the year. Consumer confidence has fallen for the third straight month and is barely higher than levels recorded a year ago. The interest rate hikes have been the main driver behind the less optimistic outlook. Especially given consumers have not had the opportunity to adjust and in the short term the impact on household budgets has been significant. Also the slide in equity markets certainly hasn’t helped confidence levels. In fact over the past three months confidence has fallen by almost 14 per cent – a result that was last seen over two years ago just after Bear Stearns collapsed.
• The latest consumer confidence result was flagged in the Roy Morgan survey released last week. Investors and analysts who seek timely readings of consumer confidence will be well served by tracking the Roy Morgan series each week. Especially given that it closely tracks the higher profile, Westpac and Melbourne Institute monthly consumer sentiment survey.
• Given the uncertainty in the economic environment and the attractive term deposit rates on offer, it is hardly a surprise that consumers widely believed that the safest place for savings is in the bank. Interestingly just three months ago paying down debt featured as a close second, however that view has shifted with consumers believing real estate being the second wisest place to park savings. No doubt the strength in property prices, falling unemployment and a growing population is resulting in investors looking at property as an attractive vehicle.
• The latest housing finance figures also confirm the attractiveness of property as an investment. While the number of loans for owner occupiers continues to slide, investment loans have tracked higher. Overall investment loans have posted decent gains for the past nine months and are now up 26 per cent on a year ago. The boost in the stock of investment properties should gain traction in coming months as economic conditions improve in the latter part of 2010.
• While the signs are encouraging on the investor front the same cannot be said for the owner occupier market. The cumulative interest rate hikes are certainly taking they toll on new housing activity. Housing finance has fallen by almost two per cent in April, and over the last ten months, housing finance has slumped by exactly 30 per cent. No doubt the likelihood of further rate hikes and the substantial growth in house prices are making potential home buyers rework their sums.
• Clearly the issues in the housing sector are centred around demand and supply of housing. The rate hikes have resulted in the demand for housing sliding (though from a very high base) however it would seem the stock of housing or new listings seem to be falling at a faster pace, a result that would justify the strength in house prices. However there are early signs that property prices are consolidating, and CommSec expects this trend to gain traction, with the lift in housing supply coming through the pipeline over coming months.
• When the latest consumer confidence result is coupled with yesterday’s weak business survey, it paints a picture of an economy that is going sideways at best. The implications for interest rates are clear. And with conservatism likely to continue, retailers will have to work hard for sales in coming months with consumers not willing to spend. Confidence is clearly paramount to the recovery cementing itself, and going forward the Reserve Bank may want to tread a little more cautiously on the rate hiking pathway, given that the global recovery is still in its infancy.

What do the figures show?
Consumer sentiment
• The Westpac/Melbourne Institute index of consumer sentiment fell by 5.7 per cent in June to 101.8. The index is now only up 1.7 per cent on a year ago, compared with the period in late 2009 / early 2010 where it was up over 30 per cent on a year earlier.
• The current conditions index fell by 8.7 per cent, while the expectations index fell by 3.5 per cent.
• Just one of the five components of the index rose in June
• The estimate of family finances compared with a year ago fell 17.7 per cent;
• The estimate of family finances over the next year fell by 4.2 per cent;
• Economic conditions over the next 12 months was higher by 2.8 per cent;
• The measure of economic conditions over the next five years fell by 9.0 per cent;
• The measure on whether it was a good time to buy a major household item fell by 2.2 per cent.
• There was a sharp fall in the gauge of whether it was a good time to buy a home (down 15.8 per cent to 94.6). There was a more modest fall in the gauge of whether it was a good time to buy a car (down 1.5 per cent to 127.7)
• Aussie consumers believe that bank deposits are the wisest place for savings (29.2 per cent of respondents), closely followed by real estate (21.7 per cent), paying debt (16.7 per cent), and shares (11.0 per cent).
Housing Finance
• The number of new owner-occupier housing loans fell for the ninth time in ten months in April, down by 1.8 per cent to 47,077 new loans - a 9-year low.
• Construction loans fell by 4.8 per cent, loans for the purchase of established dwellings fell by 1.8 per cent, while loans for the purchase of newly erected dwelling rose by 6.3 per cent. Refinancing commitments fell by 5.3 per cent.
• The value of new housing commitments (owner occupier and investment) rose for the second straight month, up 0.8 per cent in April. Owner-occupier loans rose by 0.6 per cent while investment loans rose by 1.3 per cent.
• First home buyers accounted for just 16.3 per cent of all lending in April, well below the record high of 28.5 per cent set in May 2009. Fixed rate loans only accounted for 2.4 per cent of all loans in April. And the average home loan across Australia stood at $286,900, up 7.6 per cent on a year ago. • Banks financed 91.1 per cent of all home loans (by value) in April, down from 91.4 per cent in March.

What is the importance of the economic data?
• Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.
• Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. According to Melbourne Institute: “The survey of consumer sentiment was first undertaken in 1973 and was conducted on a quarterly basis until 1976, a six-weekly basis from 1976 to 1986, and has been conducted monthly ever since.” Confident consumers may be more inclined to spend, especially on major items.

What are the implications for interest rates and investors?
• The Reserve Bank now has plenty of reasons to pause in its process of restoring rates to ‘normal’ levels. Not only is housing lending sliding, but retail spending, gauges of consumer and business confidence and activity, have all been soft in the past few months. It may prove temporary weakness of the economy, but for the Reserve Bank, it should be a case of being safe, rather than sorry.
• Looking forward, the weakness in recent housing data and increase in housing supply should result in the housing sector cooling over the next few months. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year.
• Retailers would certainly be concerned that Aussie consumers are now paring back confidence levels. Especially given that despite the relatively positive attitude over the last few months, spending has remained subdued. In annual terms retail spending has recorded little growth, and that has prompted major retailers to slash prices – a trend that will remain part of the retail landscape for the next few months.

Source Craig James, Chief Economist, CommSec

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Friday 11 June 2010 It's all about Attitude........ When your determination changes, everything will begin to move in the direction you desire. The moment you resolve to be victorious, every nerve and fiber in your being will immediately orient itself toward your success. 1. First Home Buyer awards Being a first home buyer is about breaking free and finally owning your own home. But it can be a stressful time, so it's important to know what you should expect when applying for your first home loan. Canstar Cannex has this week announced the results of its First Home Buyer Awards, which should give borrowers a good idea of the options available and tailored specifically to their needs. For this year's award, Cannex examined loans from over 60 lenders before selecting ANZ as the winner for the "outstanding service it offers first home owners". The judges found that ANZ offers a full range of educational support, product features, flexibility of offerings and ease of access to its home loan people. The full report, including state awards for non-bank lenders, is available on the Cannex website. 2. New housing down but economy up Expenditure on new housing fell 4.3 per cent in the March quarter of 2010 to be 5.5 per cent lower than 12 months ago, the Housing Industry Association observed this week following the release by the Australian Bureau of Statistics of the latest Australian National Accounts. HIA Senior Economist Ben Phillips said that the result indicated that healthy leading indicators late in 2009, such as building approvals and housing loans were yet to feed into activity on the ground. "On a more positive note, the strength of the general economy and a return to positive sentiment towards property pushed expenditure on renovations up by 2.4 per cent in March to be 9.7 per cent higher than 12 months ago," said Ben Phillips. Gross Domestic Product grew a moderate 0.5 per cent in March to be 2.7 per cent up on 12 months ago. "This solid result was driven heavily by public sector investment which was up 11.6 per cent while the private sector declined by 0.6 per cent", said Ben Phillips. He added that the pipeline of activity should translate into stronger construction activity later in 2010. 3. Construction builds in May The construction industry remained in the black for the third consecutive month in May, although the pace of growth eased slightly, according the Australian Industry Group (AIG). The latest seasonally adjusted AIG/Housing Industry Association Performance of Construction Index (Australian PCI®) was 53.2 in May, down 2.6 points but still above the 50 point level indicating an expansion in activity. House building experienced the strongest conditions, with a lift in new orders and increased investor activity raising its sub-sector index to 57.7 in May. This was in stark contrast to the apartment building sub-sector, which recorded a sharp decline in May, taking its related index down 16.8 points to 42.0. Australian Industry Group Director Public Policy, Dr Peter Burn, said that the continued expansion of the construction sector as a whole and the ongoing growth of new orders in housing, engineering construction and commercial construction are positive signs that the recovery in the sector is gaining traction following the difficulties of the past couple of years. "The increased pace of input deliveries and the growth of employment suggest that businesses are taking a more positive near-term outlook", Dr Burn said. He noted a need for caution with regards to the volatile apartment sub-sector, which has shown weakness in new orders since January. "Activity in apartment and engineering construction slumped in May and the pace of growth in commercial construction activity that we saw in April was not maintained", he said. 4. Trips and traps for owner builders The thought of saving money by building or renovating your home is always attractive, however the gains can be quickly lost once the project begins, advisory service Archicentre warned this week. Archicentre, which helps owner builders in preparing initial design concepts and provides a guiding professional hand by giving advice on design, materials and costs estimates of the projects, says cost blow outs are the major threats for owner builders. Victorian State Manager David Hallett said as many as 25 per cent of the Building Permits issued in Victoria are issued to owner builders. Mr Hallett said being an owner builder starts with a preliminary agreement and or/ design, planning or permit applications with the local Council providing a clear scope of the works involved. It can be a rewarding experience providing careful planning, costing and building contracts are in place including commencement and finish dates agreed. "The planning for the owner builder should commence at the design concept where the design is settled on and then properly costed so accurate quotes can be obtained. "Whilst tendering provides a good guide to the cost of the project choosing the cheapest quote may not necessarily the right decision", Hallett advises. "Tendering is not rocket science, it is carefully documenting and specifying the entire project so everything can be costed accurately and planned. For the builder the provision of tender documents including the type of contract to be used and the specification of fittings and finishes provides an opportunity to provide an accurate costing. "It is also vital that the contract builders' credentials are checked out to ensure they are registered, have appropriate insurance, are able to show examples of their work and importantly are able to complete the project on time. "A building contract also includes dispute resolution processes and is a major step in limiting the legal disputes which can arise if there is not accurate paperwork," Mr Hallett said. "Some renovators are paying between to 50 per cent to 60 per cent more for their renovations because they are failing to tender the projects properly." Archicentre has found about one in three requests it receives for assistance is related to renovations, design and cost blow out issues for renovators once projects started making it more expensive to correct. "One of the biggest mistakes owner builders make is that they get a quote only on the structural part of the renovation failing to recognize that around 50 per cent of the cost is to be found after lock up in fittings and finishing", Hallett says. "This can leave people financially exposed and unprepared for the potential cost blow out and disruption caused when half way through the renovation they require more funds to complete the project." Owner builders should check the building contract provisions for variations, including delays, extensions and GST. A lack of good planning will ultimately lead to confusion between the owner builder and the subcontractors if the project and contracts (including prices) have not been properly documented in the beginning. "This can lead to a stalled project, breakdown in communication with builders required to finish the job and often an impasse that can develop into a lengthy legal dispute", Hallett warns. From experience with owner builders around Australia, Archicentre has found the owner builder who works through their design carefully, has it accurately costed and uses a number independent quality inspections and reports at milestones such a foundation, framing, lock up and hand over usually has a satisfactory outcome. However, in instances where proper planning and management of a renovation program is not carried out carefully a property can be devalued and the owner left with an expensive course to fix the original renovation. A sample Renovation Design Report is available for download from the Archicentre website. 5. Barking up the wrong tree In the past, fur rugs from rare animals were used for exclusive floor coverings, but with forests slowly going the way of the buffalo are we seeing trees being `prized' the same way? Floor to Heaven have developed ornamental wood-look carpets, including one resembling a petrified cross-section of a tree, complete with faux bark around the edges and ring markings suggesting a significant age. 6. New homes for old homes A good home was left looking for a good home after a NSW family couldn't bear to see it demolished recently. The house, located near Wagga, was advertised on yours2take.com.au - a council run website aimed at diverting waste from landfill - and piqued interest on the same day, local news The Daily Advertiser reported recently. After building another home on the same block, the owners discovered they were only entitled to have one residence on their property, but felt the structure too good to tear down. With wide walls, art-deco style fittings, large living area and a big kitchen, the solid house is a steal for anyone with the means to move it.

Residential Tenancies Update

The Residential Tenancies Bill 2010 has been introduced to the NSW Parliament and is expected to pass during the current Parliamentary session.

In its current form, (see link below to download a copy), the amended Bill appears to have addressed only some of the concerns expressed by the many industry stakeholders in relation to reforms contained in the Draft Bill released late 2009. Examples of issues include:

• The proposed tenant right to break a fixed term lease during the fixed term with the payment of a "break fee" has been removed.
• Improved definition of what constitutes "minor" changes or alterations to the premises and the requirement for the tenant to obtain written consent from the landlord.

Proposed amendments, which include the 90-day notice for "no grounds" termination of a periodic tenancy, the 30-day notice to end a fixed term tenancy and the abolition of the tenant's contribution to the lease preparation, remain unchanged in the Bill. It is important to note that the proposed amendment (Section 89) - termination and repossession on ground of non-payment of rent also remains unchanged.

For those agents who reviewed the first draft of the Bill you will also note other changes in the amended Bill, for example:

• Requirement to give the tenant minimum 14 days written notice of landlord's intention to sell before the premises are first made available for inspection by prospective purchasers.
• A tenant is not required to agree to the premises being available for inspection by prospective purchasers more than twice a week.
• The removal of the 20 unit penalty for the tenant failure to comply with their duty to give access.

It is uncertain whether there will be any further amendments introduced during the Bill's passage through Parliament. Once the Bill is passed, the Regulations will be written and then released for a final consultation period. This process of preparation and stakeholder consultation is likely to take some 2-3 months. Having said that it appears that it is the Government's intention to have this legislation in operation prior to year's end, October/November has been suggested.

If this timing is correct, there will be a lot to be done in a very short time given the nature and extent of the changes, as we currently understand them.

It is important to keep in mind that NOTHING can happen until the Regulations are written and gazetted.

When the final form of the Bill is clear and the Regulations settled be assured that EAC will provide you with all the information and training required.

For more information go to the website below:

http://www.parliament.nsw.gov.au/prod/parlment/nswbills.nsf/0/D94DDA4801C2408BCA257735001B1BFF

Finally, the Reserve Bank keeps rates steady

• For the first time in four months the Reserve Bank has elected to leave interest rate settings on hold. The cash rate remains at 4.50 per cent.
• It is what left unsaid that stands out in the Reserve Bank’s statement. The statement is surprisingly short and makes no reference to housing prices, consumer spending or the job market. The Reserve Bank Board says that monetary policy settings are “appropriate for the near term”, pointing to an extended stay on the interest rate sidelines.

What does it all mean?
• You can almost hear the collective sigh of relief across Australia. Over 2008 and 2009 Aussie consumers and businesses had to contend with the North Atlantic financial crisis. And as soon as it finished then the Reserve Bank embarked on rapid fire rate increases. The only time that most people have been able to draw breath was at the start of the year. Now there is a second opportunity for Aussies to take stock.
• Aussie consumers and businesses are understandably shell-shocked and now need a little time to adjust to the new financial environment. So the hope is that this time around the pause in rates last longer than one month.
• The Reserve Bank has no doubt been surprised at the extent of caution exercised by consumers. Surveys have regularly suggested that confidence levels are high, but the evidence at cash registers shows that people aren’t putting the money where their mouth is. Still, when faced with an aggressive Reserve Bank, it’s clear that the caution is justified.
• Interestingly economists have a cash rate of around 5.00-5.25 per cent priced in by end year but financial markets are less sure, tipping rates won’t move over the next six months. As always it will depend on how inflationary pressures track over the remainder of 2010. But given that retailers are actively discounting rather than putting prices up, inflation doesn’t appear set to soar any time soon.
• CommSec believes that the economy will lift later in the year, meaning borrowers should factor in rate increases of up to half a percent. But in the current environment this appears more of an upside risk. As we have seen over the past two months, the environment can effectively turn on a dime. The optimism that was in abundance in mid April has now given way to fear and uncertainty with investment markets increasingly skittish.
• The shift in views in recent months is clearly in evidence in the bond market with yields on three-year government paper falling around 75 basis points (or three-quarters of a percent) in just the past month.
Interest rate decision and past cycles
• The Reserve Bank Board has left interest rates on hold for the first time in four months, leaving the cash rate at 4.50 per cent. In October 2009 cash rates stood at a 49-year low of 3.00 per cent. But then the RBA embarked on a process to remove the emergency stimulus, lifting the cash rate by a quarter of a percent in October, November and December 2009, and then in March, April and May 2010.
• In the last rate-cutting cycle the cash rate fell to lows of 4.25 percent in December 2001. In the two previous rate-cutting cycles, the cash rate fell to lows of 4.75 per cent.
• But given that banks have been forced to lift rates above the cash rate, the Reserve Bank has looked more closely at the variable housing rate to gauge how close rates are to “normal”. Currently the average bank variable housing rate stands at 7.40 per cent, above the long-term average or “normal” rate of 7.15 per cent.
• The Reserve Bank says: “Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term.”
What are the implications of today’s decision?
• The $64 million question is how long will interest rate settings remain on hold? Clearly consumers and businesses would love some assurances. Unfortunately that’s not possible – even the Reserve Bank would be hard-pressed making sense of the volatile environment. But certainly people need some sense of the interest rate trajectory so that they can plan and generally get on with business.
• The six-month overnight indexed swap rate is as good as any indicator in providing views on the interest rate outlook. And at present the pricing points to no change in cash rates until much later in the year.
• Housing and retail-focussed businesses have most to celebrate in today’s ‘on hold’ decision by the Reserve Bank – especially retailers of discretionary, non-essential or luxury goods.
• Looking ahead, it is clear that the Reserve Bank has sole responsibility for keeping the economy on the straight and narrow. The Federal Budget confirmed that fiscal policy isn’t playing an active role at present with the ‘automatic stabilisers’ relied upon to improve the budget bottom line as opposed to discretionary spending cuts or tax increases by the Government. So if the economy picks up pace, the focus will again switch to rate hikes.
• The modest size of the accompanying statement from the Reserve Bank almost suggests that Board members had to leave the meeting in a hurry. We are now effectively in the dark about its views on the economy given that most of the statement focussed on Europe, not Australia.

Latest Property News from Ted Hanson

Friday 04 June 2010 Quote of the week.... Defeat is not the worst of failures. Not to have tried is the true failure. - George Edward Woodberry 1. Keeping it in reserve As was widely predicted, the Reserve Bank of Australia (RBA) decided this week to leave the official cash rate unchanged at 4.5 per cent. In a statement announcing the decision, Reserve Bank Governor Glenn Stevens remarked on the need to keep the world economy under review after the de-stabilisation that occurred during May. "Since the Board last met, concerns about sovereign creditworthiness in several European countries have been a focus of financial markets", he said, citing flow-on effects on equity prices, the Australian dollar and commodity prices. "In Australia, with the high level of the terms of trade expected to add to incomes and demand, output growth over the year ahead is likely to be about trend, even though the effects of earlier expansionary policy measures will be diminishing." With inflation appearing likely to be in the upper half of the target zone over the next year and interest rates to borrowers at "around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago", the Reserve is indicating that it is unlikely to raise rates further in the near future. "Taking all the available information into account, the Board views this setting of monetary policy as appropriate for the near term", Governor Stevens said. 2. Slow turning wheels New home building is recovering, albeit very slowly, new figures have shown this week. Data released by the Australian Bureau of Statistics shows that the seasonally adjusted estimate of building work done rose 4.4 per cent, to $19,809.6m, in the March 2010 quarter. Work done on new residential building, however, grew by just 0.9 per cent to $10.6 billion, to be up 0.8 per cent on the corresponding figure a year earlier. The Housing Industry Association said that a lack of available skilled labour is exerting a constraining influence on the industry. HIA Chief Economist, Dr Harley Dale, noted that the amount of new residential work done is only 1.5 per cent higher now than it was at the trough back in mid-2009. "The value of work in the pipeline has been accumulating in recent quarters but actual work done is only grinding higher", Dr Dale said. Meanwhile the value of work approved but not yet commenced remains at historically very high levels. The 0.8 per cent increase in new residential building work done in the March 2010 quarter reflected a 4.6 per cent increase in 'other dwellings', an outcome influenced by the Social Housing Initiative, and a 0.8 per cent decline in work done on detached houses. The volume of work done on major alterations and additions rose for a third consecutive quarter in March 2010, up by 1.6 per cent, although the rate of growth in recovery has slowed in each successive quarter," Harley Dale said. In the March 2010 quarter seasonally adjusted new residential work done increased by 4.4 per cent in New South Wales, 2.3 per cent in Victoria, 4.2 per cent in South Australia, and 5 per cent in Tasmania. New residential work done fell by 5.9 per cent in Queensland, 5.3 per cent in Western Australia, and 5.1 per cent in the Australian Capital Territory. In original terms new residential work done was 36 per cent higher in the Northern Territory compared to the March quarter of last year. 3. A thin disguise Folding screens are often thought to be of use only as room dividers or period decor. Their potential, however, spreads much further. With a little imagination and flair, you could disguise an ugly doorway, hide away the office space at the end of the day, replace curtains or blinds, or just give your home an individual touch. Japanese architects and interior designers have long used folding screens to allow spatial flexibility while diffusing light to impart a sense of tranquillity to a room. Straying from the traditional panel or hinged screen, some of the more modern versions are made from a whole range of different materials, including cardboard and plastic. There are also suppliers who will design and make screens to fit your specific décor and room size. In the garden, screens can be used to hide ugly bins or gardening equipment from view. Rather than erecting brick or timber walls, try using screens made from less solid materials like woven willow or ti-tree. These will not only provide a softer, less intrusive boundary, but also create an ideal backdrop for plants or a frame for climbers such as roses, jasmine or passionfruit. 4. Approvals volatile Approvals for new dwellings fell to an eight-month low in April, after rising in March, according to figures released this week by the Australian Bureau of Statistics (ABS). Despite the drop, approvals were up by 21.3 per cent over the year. Total dwelling approvals fell 14.8 per cent to a seasonally adjusted 14,144 units in April 2010, following a rise the previous month. Private sector house approvals fell by 13.5 per cent to 8,404 to be up 4.7 per cent on the same month last year. The more volatile private sector `other dwellings' (apartments and townhouses), fell by 5.4 per cent in April to be up 42.3 per cent on April 2009. Public sector dwelling units fell by 42.4 per cent in April, to be 168.4 per cent higher than the same month last year. 5. Many Species. One Planet. One Future From Hollywood stars to schoolchildren, millions of people on every continent will take action for the planet this Saturday 5 June for World Environment Day. Organise a neighbourhood clean-up, stop using plastic bags, plant a tree, walk to work, start a recycling drive . . . the possibilities are endless. Under the theme 'Many Species. One Planet. One Future', this year's event will celebrate the incredible diversity of life on Earth as part of the 2010 International Year of Biodiversity. Thousands of activities are organised worldwide, with beach clean-ups, concerts, exhibits, film festivals, community events. See your local council website for details of activities closer to home. 6. Like fries with that? In the land that supersizes anything it can, the largest house in the US has been put on the market. Modeled on the Palace of Versailles, the 30-bedroom mansion boasts its own bowling alley, roller skating rink and Olympic-sized swimming pool, 23 bathrooms, football field, two tennis courts, a grand hall, 11 kitchens, a two-storey wine cellar and a rock grotto with three separate spas behind an 80-foot waterfall, according to the UK Telegraph. The owners/creators who began work on the property three years ago have put the estate on the market for just under AU$90m, although as the interior work including fixtures and fittings have yet to be installed, experts believe a further $30m will need to be spent before anyone can move in.