There is one topic that is guaranteed to generate sensational headlines: real estate! One day we are told that real estate is booming, the next day people like Steve Keen and Harry Dent are predicting falls of up to 40 per cent. When a boom is on we are even subjected to articles telling us how much our home is increasing each day, often accompanied by comments that it’s a tax-free gain and worth more than we are earning.
Of course, it’s all nonsense – capital gain is not something that is happening, it is something that has happened. And the sad reality is that a big capital gain last year is a red flag that next year may be very different. The principal is called regression to the mean.
The problem is that most media commentary focuses on that elusive animal they call the “property market”. We might be told that Australian property is overheated, or that the property market has fallen by 5.6 per cent in the last year (in Sydney), or that Perth values have fallen by 12.6 per cent after peaking in 2014.
But the fact is there is no such a thing as a single property market – not for Australia, not even for a single capital city – there are myriad property markets all doing their own thing. How can you compare a townhouse in Cairns with a mansion in Point Piper? All over Australia some markets may be rising, other markets may be falling, and some may be flat.
Also, real estate figures are notoriously unreliable because they take no account of improvements by owners, although these can be significant.
Headlines about booms can lure inexperienced buyers into traps, and doom and gloom scenarios can scare people from making a good decision to buy. So, if you are serious about investing in property, stop reading the headlines and set yourself a specific plan. The first task is to find out exactly what you could afford, which means talking to a lender or mortgage broker, and laying all your cards on the table.
Then, having worked out your price bracket, you need to research areas where you can buy a property you like for the price you’re able to pay. Once you have established that you are in the running, take the time to research the market thoroughly so that you become an expert on the area. You do this by going to open houses, befriending local real estate agents, and reading everything you can about your preferred location. Then when you come across a genuine bargain you will know that you have struck a winner.
Always keep in mind that the secret of success in real estate is to buy well, and then add value. Buying well often means that the vendor has a strong need to sell. This could be for a variety of reasons, such as an interstate transfer, financial strife, marital break-up or simply because they have contracted for another home. This is why it is vital to find out the seller’s motivation before you think about how much to offer.
The best way to add value is by refurbishment, which is often referred to as buying the worst house in the best street. It’s almost impossible to do this with a unit. But remember that you can achieve a free value add by simply picking an area with strong growth potential. This should generate strong demand, which should push up the price of the property you bought.
I am not at all troubled by the usual negative comments about property that are circulating at the moment. Australia’s population is on track to reach 40 million within 35 years – this has to be positive for anybody who buys well-located, quality real estate today and hangs on to it for the long term.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. firstname.lastname@example.org.
There are lots of things that money can’t buy, and when we’re so focused on those dollar signs we can find ourselves missing out on what is truly special in life.
Here are four priceless things that no amount of wealth can give you…
1. HEALTH AND WELLBEING
Sure, if you have loads of cash you can afford great doctors or a gym membership.
But it’s becoming clear that the stress, anxiety and exhaustion that come with modern life are contributing to our ill health.
If you’re constantly on the go, with a smartphone glued to your ear, mainlining caffeine just to stay sane, it can’t be good for your wellbeing.
Money might help you maintain a façade of wellness, in your top-dollar activewear, munching on your organic apple – but at what price?
What toll is the rat race taking on your physical and mental health, causing issues that might not even become apparent for years?
Likewise, constantly worrying about a shortage of money probably isn’t great for you either, but if you can be happy and content with just having enough, your body and mind will thank you for it.
2. PEACE IN YOUR HEART
Money might buy you peace of mind – you know you have an emergency fund in the bank to cover you if the car breaks down, or enough super stashed away to support you in retirement.
But it can’t give you peace in your heart and soul.
I know so many people who have financial peace of mind, but are never at peace with themselves.
Perhaps it’s because of the job they have to do to gain that financial security, such as twisting the truth as an ad exec, or spinning dubious sales pitches to unsuspecting customers.
Or it could be due to the other things they’ve been forced to give up to achieve it, like time with their kids or their hobbies.
No amount of money can buy you inner peace, and it’s hard to get a refund if you sell your soul.
3. TRUE LOVE
I once heard a very wealthy man say that finding true love was almost impossible for him, because he never knew if women were really into him, or just blinded by the dollar signs.
He preferred to hang out with ladies who had no idea who he was or what he was worth, so he could be sure that they were genuine.
Most of us think that having more money or success will help us attract a mate, but money can’t buy true love – in fact, it could actually have the opposite effect, attracting vultures with ulterior motives instead.
And any relationship based on a flashy lifestyle is bound to crumble when that pot of gold dries up. If it’s real, lasting love you’re after, it shouldn’t come with a price tag attached.
It might be a cliché, but it’s so true.
All the money in the world can’t buy you the time you so desperately wish for.
It could be time with your kids, before they grow up and become too cool to hang out with you, or more time with your dear Mum before she passed away, to tell her how special she was.
Nobody ever looks back on their life and wishes they’d spent more time at work and less time doing life.
Show me one parent who regrets all the sports carnivals or school concerts they attended – you can’t, right?
But plenty of us look back on our lives and realise we wasted so much time chasing success and keeping up with the Joneses, that we forgot to stop and appreciate our family and friends.
There will always be another opportunity to make money, but time is a precious commodity, so savour it.
Can a lifetime renter retire as wealthy as a property owner? Or does the "Rent generation” face a less secure future?
Financial experts say the latter is the case, unless those who don’t buy — because they can’t afford to or don’t want to — get smarter and save harder than their property-owning peers. Even then, most say it would be difficult to retire with as much wealth as a property owner.
The Rent Generation will retire into an aged pension and superannuation system not set up for people who rent.
The most recent research from the Australian Housing and Urban Research Institute shows a surge in the proportion of renters who are long-term tenants. One-third of all private renters were long-term in 2013, up from one quarter two decades ago.
“Income support systems are premised on outright [home] ownership and therefore Australian pensions tend to be much lower than equivalent countries,” Swinburne University housing professor Terry Burke said.
“So if you are still a renter, by the time you retire, you can be in real financial stress to cover the rent.”
Swinburne University has already identified a threat of homelessness to older women who haven’t had the opportunity to own property and save super before they retire.
Affordability pressure leaves wannabe-buyers in a conundrum: take on excessive debt to either move to poorly-serviced fringe suburbs or buy into one of Melbourne’s non-family friendly apartments. Research has shown young people are already delaying life decisions faced with these options.
Financial experts say it is possible, although challenging, for lifelong renters to comfortably cross the finish line into retirement.
After income dries up, a larger nest egg is needed and savings from not having a mortgage need smart investment. The key would be to invest the difference rather than simply saving, finance commentator and educator Nicole Pedersen-McKinnon said.
“Interest rates are barely keeping pace with inflation, so forget putting in bank,” she said.
“The vital thing is to save what you save … a mortgage is the perfect forced savings vehicle. You can’t go out and drink your repayment, so a renter would have to be as focussed and unwavering in their investment.” She said tax-effective wealth-building options included super contributions and investing in shares.
Empower Wealth chief executive Ben Kingsley said the long-term average returns of super were below that of property, although he warned real estate was not a guaranteed investment.
He said modelling showed people were better off ‘rent-vesting’: where they bought an investment property, perhaps at a lower price point out of the city, and rented in the area they wanted to live.
Kevin Lee of Smart Property Adviser said while someone could “get lucky gambling on the stock market”, he agreed buying a home that someone else could pay off was one of the best ways to create equity to retire on.
For renters it’s not just a looming retirement question to face, but also a lack of renter’s rights, a tax system that favours property owners and a threat of another economic crisis.
article by Bessie Hassan, Head of PR & Money Expert, at finder.com.au
Australians are more comfortable talking about sex and politics than they are about money, according a new survey. Money is a topic off limits for nearly half of the population, the research showed.
The survey found 42 percent of those surveyed find personal finances the most difficult thing to talk about, even more than religion (40 percent), sex (38 percent) and politics (23 percent).
Just 18 percent of Australians regularly discuss money. Baby Boomers (aged 55-74) are the least comfortable generation when it comes totaling about money, with 56 percent never discussing it.
“Many in that generation were raised to believe that talking about money is rude or impolite and those are hard attitudes to shake,” says Ms Hassan.
Australian Talking Topics
Generation Y (aged 18-34) are the most likely to talk about money – with one in three (33 percent) often discussing personal finances. “We all need to be careful about what information we share – obviously keep specifics like account numbers or passwords private. But sharing ideas on how to save money or managing finances can make a big difference in people’s lives,” she says.
Top 3 reasons to talk about money
Message from CAtherine
Occasionally I come across an interesting article to do with Home Loans. I thought I'd share some of these with you here.