Helping Time-Poor Investors: Weekend reads – Must read articles from the last week

There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.

Each Saturday morning I like to share some of the ones I’ve read during the week.

The weekend will be over before you know it, so enjoy some weekend reading.

Property Outlook: Market uncertainty starting to clear

It would seem that things are starting to look up for the property market.

According to Realestate.com.au’s property outlook – the market uncertainty is starting to clear.

Realestate.com.au’s April 2019 Property Outlook report shows a picture of moderate year-on-year change in the median dwelling price across most capital cities, though Sydney has recorded the sharpest annual drop at 8%, down to $830,000.

Despite regular comparisons with Sydney, Melbourne’s market fared stronger year-on-year, with a decrease of 4.1% taking the median price down to $660,000.

The other capital cities to experience price drops for the 12-month period were Perth (-3.9%), Darwin (-3.4%) and Brisbane (-0.9%).

Hobart experienced a steady 5% growth, lifting to $425,000. Canberra and Adelaide prices also rose incrementally, up 0.9% and 0.8%, respectively.

Nerida Conisbee, realestate.com.au’s Chief Economist, says this property downturn is “far from” the worst the Australian market has seen, although home owners in Sydney, Perth and Darwin may feel otherwise.

“These cities are the most challenged in the country right now – Perth and Darwin are five years into a downturn, while in Sydney it has been shorter and faster, with prices down almost 10% in only 18 months,” Conisbee says.

“In other cities, the results are far more mixed. Melbourne frequently gets lumped in with Sydney when discussing the falling market, but the reality is Melbourne is holding up a lot better. Elsewhere, conditions are relatively flat.”

Median dwelling price by capital city*

Adelaide: $441,250

Brisbane: $495,000

Canberra: $595,000

Darwin: $450,000

Hobart: $425,000

Melbourne: $660,000

Perth: $470,000

Sydney: $830,000

*For the March quarter, 2019.

Sydney’s housing market has had a shorter but sharper downturn than some other capitals.

Moving forward, Conisbee says the outlook for the market is “getting clearer”, following the release of the Financial Services Royal Commission findings, which were creating uncertainty earlier in the year.

“In the end, [the final report] said pretty much nothing about housing finance… the biggest impact of the Royal Commission was actually when it was announced, with banks immediately beginning to focus more on responsible lending,” Conisbee says.

“Finance is set to continue to ease this year… this won’t bring back investors to the same point as during the boom, but it will make it easier for them. Ideally it will put first home buyers and upgraders in a better position, particularly because, for this group, buying conditions are far better than two years ago.”

Despite the clarity afforded from the banking sector, the upcoming federal election result will cause somewhat of a stalemate.

“If it wasn’t looking like we’re in for a change of government, it is likely we would be seeing prices stabilising right now,” Conisbee says.

“Elections create paralysis in property markets – new listing volumes decline and buyers sit on their hands.”

Australia’s most sought-after suburbs

South Australia and New South Wales dominated the top 10 in-demand suburbs in Australia for the three months to March 2019, but the Victorian suburb of Middle Park took the number-one spot.

This is the second time this year that Middle Park has ranked as Australia’s most in-demand suburb.

The affluent beachside suburb attracts plenty of attention for its lifestyle opportunities, established amenities, and impressive range of housing stock, including character cottages and terraces.

Here are the most sought-after suburbs on realestate.com.au for the quarter, determined by the number of views per listing.

Middle Park, VIC

Millswood, SA

Killarney Heights, NSW

Crafers West, SA

Allambie Heights, NSW

Stirling, SA

Collaroy Plateau, NSW

Birchgrove, NSW

Aldgate, SA

Belair, SA

Middle Park is once again the most in-demand suburb on realestate.com.au.

Adelaide featured heavily in the top 10, including Millswood in the city’s inner-south, and Crafers West, Stirling, Aldgate and Belair in the popular, leafy Hills region.

Rounding out the list were Sydney suburbs: Killarney Heights, Allambie Heights and Collaroy Plateau in the Northern Beaches, and Birchgrove in the inner west.

The list demonstrates a continuing interest in lifestyle-led suburbs, particularly those offering ‘sea change’ or ‘tree change’ potential.

Read the full article here

AFG sounds wake-up call

Results show the credit squeeze has hit it’s volume.

This Blog by Pete Wargen looks at the numbers.

Australia’s largest mortgage aggregator Australian Finance Group (AFG) implored in its March 2019 quarter ASX release that the figures for the first quarter of calendar year 2019 were “a wake-up call for policymakers” as activity floundered at the lowest level in half a decade.

The banking Royal Commission dragged on all the way into February 2019, and AFG pointed to the credit squeeze as the cause of lower mortgage volumes, with declines in all states and territories pushing investor market share to an all-time low “despite moves by regulators to encourage activity”.

The fact that declines have been seen everywhere across the country represents compelling evidence that credit availability initiated the slowdown.

In an interesting and obliquely related development the AFR reported that the Labor Party has now deleted the detail of its proposed negative gearing and capital gains tax policies from its website.

That’s tantamount to an admission that Labor’s figures were clearly wrong on the volume of investment going into established dwellings, which has been massively overstated at 93 per cent.

Perhaps another driver of the deletion was the previous assertion that there were too many investors in the market, which was self-evidently the case when the policy was formed back in 2016, but clearly no longer on these numbers.

There’ll be no backing down on the policies with the election only a matter of weeks away, though.

Read the full article here

The risks to everyday Australians in Labor’s property tax policy

What are the risks for everyday Aussies with Labor’s property tax policy?

In this article for Switzer, John McGrath explains what we can expect.

Property is the vehicle that most Australians have utilised to secure financial freedom for themselves and future generations.

Investing in a property beyond the family home has been a safe, easy-to-understand and easy-to-execute wealth plan that has delivered robust, long-term security for generations of everyday Australians.

Puffery that suggests property investment is a haven for the wealthy to park funds and reduce tax is far from the reality that I’ve observed for over 35 years in real estate.

I’ve seen thousands of everyday Australians secure an investment property with a modest deposit and enjoy the long-term benefits of holding it for one or two economic cycles or 10 to 20 years.

In the process of them securing their long-term financial security, this has also provided much needed rental accommodation for millions of Australians.

The local, state and federal taxes and costs associated with buying, holding and selling property, including stamp duty, income tax, local Government taxes and capital gains tax are already enormous.

Most property investors don’t negatively gear their investment as a cute way to reduce their tax, they do it as it’s the only way they can afford to secure an investment property.

Federal Labor’s proposed legislation to remove negative gearing from certain property types could see the killing of the goose that has laid millions of golden eggs for everyday Australians.

With the election fast approaching, let’s re-cap what Labor is proposing.

If Labor wins the election, they intend to abolish negative gearing for established properties purchased for investment from 1 January 2020. Any purchases after this date can only be negatively geared if they are brand new or off-the-plan properties.

All properties negatively geared prior to January 1 will be grandfathered, which means these investors can continue to use negative gearing on that investment.

Labor intends to cut the capital gains tax discount from 50% to 25% for all investors after January 1. The discount applies to investors who hold their assets for more than one year.

Investors who owned assets prior to January 1 will receive the original 50% discount.

Latest statistics released by the Australian Taxation Office in March show there were 2.16 million landlords in Australia in 2016-17.

An overwhelming majority (71%) owned just one rental property.

Read the full article here

The housing market is not the economy

While we are not short of negative headlines surrounding the property market, the question remains – is this defining the state of our economy?

An article in the Sydney Morning Herald looks at why the answer is – NO …

It’s hard to go more than a day or two without reading a worrying headline about the housing market’s woes, led by price falls in Sydney and Melbourne.

Given all the public attention property attracts, this might leave you thinking that the economy’s fate is inextricably tied up with what happens to the price of bricks and mortar.

However, this would be misguided.

It’s true that swings in the housing market can have important implications for the financial system and the economy.

The media also pays lots of attention to housing because, for so many people, it is their biggest asset.

However, the property market is not the economy, and what’s going on in housing is probably not always as economically important as you might think.

First, it helps to put the recent fall in property prices into perspective.

National Australia Bank economist Kieran Davies reports that capital city prices are down by about 8 per cent from their peak, which is the sharpest fall in the period since the Second World War.

That sounds dramatic but, remember, property prices also posted rapid growth in the preceding decades, so they were falling from a very high starting point.

That means the proportion of people in negative equity — where they owe more than their house is worth — is still low.

The Reserve Bank has estimated about 2 per cent of borrowers are in negative equity and this is most common in mining-heavy areas.

So, what are the channels through which these falls in housing affect the “real” economy of jobs, investment and consumption?

One of the biggest impacts of falling house prices that gets a lot of attention is the “wealth effect.”

This is the idea that homeowners, especially those with big mortgages, will put the brakes on spending because they are nervous about their declining paper wealth.

Reserve Bank deputy governor Guy Debelle this month said household consumption had slowed sharply in the second half of last year, but he wasn’t convinced it was because of the “wealth effect.”

He pointed out consumption growth had slowed far more sharply in NSW than Victoria, even though both have posted hefty falls in house prices.

Rather, it might just be that the lower number of houses changing hands is resulting in fewer people spending on things like furniture or whitegoods.

NAB’s Davies says that any “wealth effect” may be more visible this time than in the past, because wages are growing so slowly.

However, he says the biggest drag on growth from the declines in house prices occurs via the construction industry.

When prices fall, there’s less incentive for developers to commit to building apartment blocks, as they have been at a record pace in recent years.

Another way in which house prices can dampen the real economy is via small business owners, some of whom borrow against the equity in their homes.

As prices come down, the credit available to these business owners declines.

These are all ways that weak house prices can dampen the economy but they are hardly the biggest challenges facing the country.

Read the full article here

Find Out What Your Coffee Order Reveals About Your Personality

Are you an Espresso or Latte drinker?

This article from Littlethings.com looks at what you coffee order says about your personality.

Dr. Gary L. Wenk writes in Psychology Today, “Coffee makes us feel so good because it is able to tap into virtually every reward system our brain has evolved.”

It makes total sense that there is a connection between the mind and the type of coffee we drink.

Espresso

If you are an espresso drinker, you are someone who is a natural born leader.

You work very hard and you also play very hard.

Your Type A personality makes you a person who know how to get things done.

And your hardworking nature is an inspiration to others, both at work and in your social life.

Double Espresso

f you are a double espresso drinker, you are someone who believes in logic.

You are an extremely practical person and are not susceptible to flights of whimsy like some of your friends.

Like a single espresso drinker, you are a very hardworking person.

However, you function much better with clear, concise direction from others.

You do your best at work when your boss tells you exactly what they want.

Latte

If you are a latte drinker, you may be someone who has trouble making decisions.

You have a more laid back nature and, as a result, you don’t worry about overanalyzing every decision.

In fact, you are much more reflective in nature, preferring to let your imagination consider all the options in a leisurely manner.

Cappuccino

If you are a cappuccino drinker, you are a very sophisticated individual.

Your sense of style is very polished and put together.

Unlike some of your friends, you aren’t the type of person to make crass jokes.

You prefer to keep things a little classier.

You also have a very creative mind, and your sociable nature makes you a very good friend to others.

Frappuccino

If you are a frappuccino drinker, you are a much more adventurous person that a lot of your friends.

You prefer to be spontaneous and live in the moment, rather than plan every detail of your day.

By nature, you are a very happy person, and your positive energy makes you very easy to be around.

Iced Coffee

If you are an iced coffee drinker, you are a very assertive person.

You have a take-charge attitude and don’t have time for pettiness or drama.

You feel very confident in expressing your opinions and you think of yourself as somewhat of a trendsetter.

Regular Coffee, Black

If you are a black coffee drinker, you lead a much more minimalistic lifestyle.

You don’t need splashy clothes or gaudy jewelry.

You much prefer a straightforward approach in fashion and in life.

You tend to be on the quiet side and can sometimes be prone to mood swings.

But your straightforward nature makes you a friend that others want to be around.

Regular Coffee, Cream And Sugar

If you are a cream-and-sugar coffee drinker, you have somewhat of a dual personality.

On the one hand, you are organized and put-together. But on the other hand, you love to cut loose and get a little messy.

Each day, you find yourself trying to strike the perfect balance between the logical and creative sides of your brain.