2008 The good, the bad and the ugly

What exciting times we live in!. At the start of this year and up until about April, the real estate market was booming and everyone was making lot's of money, but could it all last? Of course not, otherwise we would have been paying $500k for a basic 3 bedroom home in Moorooka or Salisbury and no one would have been able to afford to buy a home. So along came the bust, which always follows the boom, as sure as night follows day.

A new market is certainly upon us and sellers are struggling to come to terms with the fact their property value has decreased by about 10% since April and we are hoping it has now bottomed out. Buyers are still very reluctant to make an offer if the listed price is too far away from what they are thinking as they don't want to offend the Seller, so we have a "stand-off" situation happening at the moment, unfortunately, this will not change until the Seller's realize the market is not going to improve in the short term and if they are serious about selling they need to meet the market.

Are we in a recession?. I guess it depends on who you listen to! Would it really hurt us all to stop spending and start paying off those credit cards etc. I think not.

We certainly have some of the most expensive real estate in the World and that is very unfortunate for all of us, but that cannot change as our high home ownership rates continue to rise, but what can change and will change is the deposit and income you now need to obtain the home loan as lending institutions tighten their belts.

Being a "baby boomer" and paying 18% interest on my 1st mortgate, with two young children in the 1970's was still much much easier to manage than it is today as the home cost was only approximately 2.5 times of your yearly earnings eg: if you earned $10,000 per year the medium price in Brisbane was $25,000 now unfortunately it is a whopping 7.5 times your yearly salary. We also had to have at least 10% deposit, and our first homes were not that flash. A huge change is thirty years, but is it for the better. I sometimes wonder.

Our family has had a very big year this year and it continues with my daughter Natalie (photo below) leaving for the Cayman Islands to ply her trade as a Chartered Accountant (tax haven) for the rich and famous, we will miss her terribly but wish her well. Bev's eldest daughter Helen was married a couple of week's ago on the Coast (see photo of her daughter Gabby Jane and Mandy's (her sister) little girl Poppy Kate, both very cute kids. It was a great occasion with all my 7 brothers and sisters in attendance, also Mum (82yrs old) danced the night away, we had a fantastic time, sore feet and sore heads the next day. It is great to all be together every now and again as we are scattered from Darwin to Melbourne.





Don't forget if you would like to crunch some numbers you can call our Finance Expert Leah Blackford on 0406 429 041 and she will only be too happy to help. If you would like any information re selling or buying please give me a call on 0411 664490.

First home buyer's grant

A welcome announcement by the Government yesterday for the "First Home Buyer's Grant" doubling the $7,000 to $14,000 for existing properties and for new homes increasing the amount to $21,000. This hopefully will have a very positive effect and we should see a lot more Buyers out and about this weekend or certainly within the next couple of weeks.
However, the banks have tightened their belts over the past couple of months, it is a lot harder to borrow 100% of the purchase price now, as was the norm this time last year, they are also looking for a good savings history and stability of employment, but with what has happened in the USA you can understand their thinking.
Unfortunately for people who rent, no relief is in sight as the vacancy rate is still very low, however, maybe now is the time to look at buying a property as you may find your mortgage will not be more than what you are paying in rent. Please give me a call on 0411 664490 if you would like some assistance in this area, and I will introduce you to one of our very experienced Finance Managers who will be only too happy to crunch the numbers with you.

Migration Boom Rolls on ...

Population statistics

Australia is experiencing the biggest migration boom in history with 199,064 migrants arriving in the year to March 2008. Australia’s overall population grew by 1.61 per cent over the year – the fastest rate of growth in almost 19 years.
Just fewer than 278,200 babies were born over the year to March, down from 26-year highs but affected by processing delays in NSW.
Victoria’s population is growing at the fastest rate in 37 years, while South Australia’s population is growing at the fastest rate in 24 years and Western Australia’s population is growing at the fastest pace in 19 years.
What does it all mean?

Australia’s population is growing at the fastest rate in almost 19 years and much of the boost has been provided by migrants. The remarkable lift in Australia’s population has significant consequences for the economy. The faster rate of population growth means that the economy can grow at a faster pace.
However all the extra people also put greater demands on our economy. Extra productive capacity is being added, but it carries with it some extra inflationary risks. It’s not surprising that states have to undertake huge infrastructure programs given our fast-growing population. And our population is set to grow at a similarly fast rate over the coming year.
It can’t be stressed enough that Australia’s migrant boom is a big deal. Not just in boosting economic growth in the short-term but also in addressing the longer-term implications of Australia’s ageing population.
The strength and growth in population continues to put further upward pressure on the demand for housing. While the supply of housing remains far short of demand we are seeing that the housing sector is slowly starting to build more homes. The rental market is the tightest in 18 years and can’t get much tighter. The strength in rental yields and a more uncertain outlook for the share market is likely to see more investment in housing over the coming months.
The demographic areas that have seen slower population growth are not surprisingly the same areas that are seeing a slower overall pickup in the housing sector. The sluggish growth in NSW housing starts is directly correlated with the weakness in population growth.
Certainly it’s not just China’s demand for resources that is propelling the Australian economy forward. The increase in skilled migration helps meet the demand for labour by Australia’s employers. While an increase in migrants sees further demand for housing, general retail spending and even the purchase of more costly white goods. In short, the inflow of skilled migrants creates a virtuous cycle of higher employment, spending and investment, while keeping a lid on inflationary pressures.
The record increase in migration levels has been pivotal in keeping down wage and price inflation in Australia. Demand for labour has been soaring but importantly the supply of workers has been just as strong, not just through immigration but more mothers and seniors in the workforce.
Australia’s current baby boom is certainly a reflection of the buoyant economic times. With plenty of jobs on offer (especially with unemployment rate near 33-year lows) and the baby bonus still in play, Australians are no doubt feeling more financially secure and thus more confident about starting a family.
Interestingly, an increase in the birth rate potentially draws female workers away from the workforce. As a result even more migrants may be required to meet the demand for skilled labour.
What do the figures show?

A record 199,064 people migrated to Australia over the year to March 2008. The previous high was 184,400 migrants in the year to December 2007.
Over the year to December, 57,955 migrants settled in NSW, followed by Victoria (52,665), Queensland (39,034), Western Australia (32,278), South Australia (13,441), Tasmania (1,460), ACT (1302), and Northern Territory (930).
Australia’s population expanded by a record 336,800 people over the year to December to 21,283,000 people. Overall, Australia’s population grew by 1.61 per cent over the year to March 2008 – maintaining the strongest gain in almost 19 years (year to June 1989). Population growth had been strong over the 1988-1990 period due in part to Australia’s bicentenary.
Natural increase (births less deaths) was 137,600 in the year to March.
There were 278,200 babies born in the year to March 2008, just shy of the 285,000 recorded in calendar 2007 –which was the largest number of births since quarterly records was implemented over 26 years ago. However processing delays in NSW accounts for much of the recent easing.
Over the past year population growth was fastest in Western Australia (2.59 per cent), followed by Queensland (2.21 per cent), Northern Territory (2.15 per cent), Victoria (1.69 per cent) ACT (1.37 per cent), South Australia (1.07 per cent), NSW (1.05 per cent), and Tasmania (0.92 per cent).
Victoria’s population is growing at the fastest rate since 1970. Western Australia’s population is growth at the fastest pace since 1989. South Australia’s population is growing at the fastest rate since 1984.
NSW accounts for 32.6 per cent of Australia’s population – the lowest proportion in 130 years. The share of Australia’s population in Western Australia (10.1 per cent) was a record high as was the share of national population in Queensland (20 per cent).
What is the importance of the economic data?

Demographic Statistics are issued by the Bureau of Statistics each quarter. The figures includes estimates of births, deaths, in-bound and out-bound migration movements and estimates of population change by State.
What are the implications for interest rates and investors?

More people are coming to our shores, but we are not building enough homes. The strength of Australia’s population growth points to the likelihood of strong housing construction in 2009. Building material companies, developers, retailers and banks have potential to gain from the lift in housing activity.
A whole raft of companies benefit from fast population growth. The building block of retail spending is population, so the increase in births and migrant numbers is likely to help keep retailers such as Woolworths, Harvey Norman and David Jones seeing continued growth.
Source Savanth Sebastian - Equities Economist, CommSec