Saturday Summary – the most interesting articles I’ve read this week (2014/05/24)

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.

Enjoy your weekend…and please forward to your friends by clicking a social link buttons on the left.

Is the property bubble about to burst?

In a recent article Money Magazine explains that the talk of a house price bubble has not scared off property investors, who have continued to plough into real estate.

Then they quote me and a number of other experts as to why there is no bubble about to burst:

Michael Yardney, a director at Metropole Property Strategists, also rejects Dent’s bubble theory, saying it is not the first time Dent has predicted a bust. “Remember, for a property market to crash, you need desperate sellers willing to give away their properties at fire sale prices and no one willing to buy them.”

For our property markets to crash – which is different from a slowdown or the normal cyclical correction – Yardney says you need one or more of four things to happen, none of which is on the horizon: a major depression, massive unemployment, exceedingly high interest rates and an excessive oversupply of properties. But for investors, particularly those buying in Sydney, it is a time to be cautious and maybe sit back until prices moderate.

The other factor that investors must always take into account when selecting properties is demographics. After all, the main requirement for the success of an investment property is that it is in strong demand from rent-paying tenants.

First, pay attention to overall population growth patterns. The latest Australian Bureau of Statistics figures show that at June 2013 the rate of population growth in capital cities was significantly greater than that of regional markets.

Almost two-thirds (66.3%) of all Australians live in a capital city, up from 64.6% in 1991. And almost two out of every five (39.4%) live in either Sydney or Melbourne. Perth and Brisbane have also experienced strong population growth between 1991 and 2013, whereas Adelaide and Hobart have gone backwards.

Second, pay attention to household sizes. “Living in compact housing is becoming more popular across Australia due to our changing demographic make-up and lifestyle expectations,” says real estate commentator Michael Matusik. He points to the fact that every second household now supports just one or two people and that this proportion will rise.

Changing lifestyles also mean that long commutes to work are becoming less acceptable, Matusik says. “We, as a nation, seem happy to trade space for place.”

 

How changing demographics will affect property | Auction tips | Understand the Asking Price Index

Another great Real Estate Talk show  produced by Kevin Turner. If you don’t already subscribe to this excellent weekly Internet based radio show.

In this week’s show:
Louis Christopher explains how to use the Asking Price Index to recognize what’s going on in the market
Cherie Barber talks to us from a renovation she is doing for Channel 10’s Living Room
Host Scott Pape talks about the lessons learned during the production of the Channel 7 show Under The Hammer
Master auctioneer, Will Hampson, has some sound advice for auction sellers

You should definitely subscribe to this weekly audio program. Click Here It’s free and you can listen on the go on your smartphone, iPad etc.

 

No interest rate hikes in 2014…or 2015…? Pete Wargent

Regular Property Update Blogger Pete Wargent looks at the latest RBA minutes in his blog and concludes that declining consumer confidence means that interest rates are unlikely to rise any time soon and, in fact, the next move may even be down…

Think back to the Reserve Bank’s April Minutes, where it said that:

“…the Board’s judgement was that monetary policy was appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the 2–3 per cent inflation target. 

The Board would continue to monitor developments in the economy, with members noting that, on present indications, the most prudent course was likely to be a period of stability in interest rates.”

If back in April we were expecting to see a period of stability in interest rates (i.e. stuck at a generational low of 2.50%), then a month or so on, we should be expecting an even longer period of stability.

Recall that in April, the RBA mused that:

“Despite commodity prices falling further over the past month, the exchange rate had appreciated a little further.”

Declining confidence pushes out hikes

That may have been true then, but since that time the iron ore spot price has continued its decline, now sharply by an extra 7% or so in just a couple of weeks, to well under US$100/tonne. [sam id=43 codes=’true’]

And further, with Treasurer Joe Hockey delivering a number of cuts in the 2014 Federal Budget, consumer confidence today was reported as having been wiped by 3.2% in the last week and 14% over the past four weeks, the sharpest monthly decline since the ANZ/Roy Morgan series began.

In short, if interest rates were set to be on hold for quite a while anyway, now they are likely to be staying on hold for longer

Futures markets are struggling to price in even one hike in the next 18 months and the implied yield curve has flattened out quite markedly.

The next cash rate adjustment might even yet be down.

 

5 ways our minds trick us into not investing

In Your Investment Property Magazine Tracy Lunis explains a bit about the psychology of investment and the five most common fears of prospective investors.

1. What if we have problems with tenants – or can’t get one? 
Make sure you have landlord insurance set up which will cover you for damage or loss of rent. You should also line up a good property manager as soon as possible – ideally prior to settling – to help you get a tenant in as soon as possible, and to do the hard work of tenant screening, lease agreements and liaison.

2. What if I buy the wrong property? 
There’s no substitute for research here – buy a property in an area where you know it can be rented, and where capital growth is likely.

3. What if I can’t meet the mortgage payments?
 Get your finances in order before you start investing: principally, make sure that you can cover the payments, and that you’ve got a cash buffer to cover you for unexpected circumstances.

4. What if I end up losing money?
 Be proactive about adding value – consider renovations, even if it’s just repainting and putting in new carpets. Take control of your asset – don’t just leave it down to market forces.

5. What if it’s a scam? 
Again, this comes down to research. Scams typically trade on ignorance: as long as you are thorough about investigating your chosen areas, you should be fine. And remember, if it seems too good to be true, it probably is!

 

Effects of Childhood Bullying Last at Least 40 Years

PsyBlog reports the first ever long-term study of the mental scars that bullying leaves finds its effects are still detectable 40 years later.

The findings, published in the American Journal of Psychiatry, come from the British National Child Development Study which includes 7,771 children who were born during one week in 1958 (Takizawa et al., 2014).

When they were 7 and 11-years-old, their parents were asked whether they were being bullied.

Of the children in the study, 28% were bullied occasionally and 15% were bullied frequently.

The children were then followed up until they were 50-years-old.

The study’s lead authors, Dr Ryu Takizawa, explained the findings:

“Our study shows that the effects of bullying are still visible nearly four decades later. The impact of bullying is persistent and pervasive, with health, social and economic consequences lasting well into adulthood.”

The effects of being bullied were seen across a wide range of psychological measures, including:

* A higher risk of depression, anxiety and suicidal thoughts.

* Poorer cognitive functioning.

* Lower quality of life.

* Lower life satisfaction.

* Less likely to be in a relationship.

The study took into account IQ, any behavioural and emotional problems the child had, how wealthy the family was and the parents’ involvement with their child.

The study’s senior author, Professor Louise Arseneault, said: “We need to move away from any perception that bullying is just an inevitable part of growing-up.

Teachers, parents and policy-makers should be aware that what happens in the school playground can have long-term repercussions for children.

 

Blogs you may have missed this week:

If you didn’t have a chance to read my daily blog, here’s a list of some of the blogs you missed this week:

Brisbane Property Market Outlook | Michael Matusik

Last Week’s Budget Had 4 Direct Influences on Housing – Louis Christopher

[Video] The latest property news with Kevin Turner | 21st May

This week’s property market trends | RPData

A short cut to building a true property investment business

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About

Michael is a director of Metropole Property Strategists who create wealth for their clients through independent, unbiased property advice and advocacy. He's been once agin been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


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