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.
Economics Made Simple
In a recent newsletter veteran economics guru Noel Whittaker gave a simple economics lesson:
There are two major tools governments can use when trying to speed up or slow down the economy – monetary policy and fiscal policy. The former is the price of money, and the latter is the adjustment of the flow of money in the community.
Monetary policy is the control of interest rates. If the economy is booming and you want to slow it down, you just simply raise the price of money by putting up rates.
Housing repayments go up, which means less money in people’s pockets for them to spend. It also means that people who are considering buying or developing a property may have second thoughts.[sam id=43 codes=’true’]
Conversely, to stimulate the economy you drop rates because there is more money in people’s pockets, and the property market usually booms because the same mortgage payment buys a more expensive property.
The problem with monetary policy is that it loses its effect as interest rates continually drop and you reach a stage, as is happening right around the world now, where another drop in rates doesn’t do much at all.
To use fiscal policy, you change taxes or adjust government payments. Cast your mind back to when the GFC hit, and the panic the Rudd government was in when they were trying to stimulate the economy. They mailed cheques for $900 to most people, and also embarked on the disastrous pink batts scheme.
A much simpler and more effective strategy would have been to cut income tax rates overnight. This would have increased everybody’s take home pay immediately, and given human nature, it would almost certainly have been spent. The great thing about this strategy is you can start it quickly and stop it quickly.
On the other hand, you can slow down an economy by raising taxes because the effect is similar to raising interest rates, but acts faster. A tax rise means less money in people’s pockets for them to spend.
National Property Update With 7 Property Experts
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:
George Raptis says that in New South Wales it is still possible to buy well
Peter Koulizos has the lowdown on the South Australian market
Damian Collins provides an excellent overview of the Western Australian market
Shannon Davis says that there has been a renewed level of interest in the quality suburbs that are offer strong returns
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.
Has immigration into Australia peaked? Pete Wargent
The net long term migration into Australia of 385,360 on a rolling annual basis. That’s huge.
It’s true that figure is down a little on the peaks we saw in January 2013 (411,000) and September 2009 (409,000), but it’s still a massive net long-term migration figure into Australia.
This is particularly so when it’s considered that the immigration is focused so heavily on only four capital cities.
Remember too that it’s estimated that in Australia there is one birth every 1 minute and 42 seconds as compared to one death only every 3 minutes and 36 seconds.
Buying in a Hot Property Market – John McGrath
I recently wrote a blog with 9 tips for buyng in a hot property market. Interesting John McGrath wrote something similar with a different set of tips:
1. Registering on major portals is not enough. It’s important to register your criteria with individual agencies because they’ll put you on their database and you’ll usually be contacted before new properties are even advertised. In a hot market, many homes never make it to their first public open.
2. Get a great team around you. Go into the market with a mortgage broker, accountant, pest and building inspector and conveyancer at the ready. Being able to move quickly is paramount.
3. Take comfort in the competition. Competition is social proof that the property you want is worth fighting for!
4. Stretch your budget – but not too much.
5. Tell the agent you’re interested. If you don’t make your interest known right away, you might not get the chance to make an offer. Remember, many properties sell prior to their scheduled auctions in a hot market and this often happens in the first week
6. Look next door. If you’re continually missing out on properties, consider the suburb next door.
7. Make good offers. Don’t muck around in a hot market
8. Bidding at auction. Project confidence and make your bids fast and assertive.
How Investors Really Get Screwed In Mining Towns
Your Investment Property Magazine explains 8 ways investors have lost out investing in mining towns:
8. Changing rental yields– rents have dropped dramatically in many mining towns
7. Corporate/company leases- despite the ability to get long leases there is often a high turnover of people in the property. This causes excessive wear and tear and there is no individual responsibility – unless an actual individual name is on the lease.
6. Buying at the wrong end of a cycle – The timing of entry and the phase of the mine life cycle are very important to get right and not many investors know how to do it.
5. Buying at the wrong phase of mine development – This often equates to a contraction in the local property market once extraction of the dirt begins, unless there are other projects in the pipeline.
4. Type of mining involved – There needs to be clear indication of long term demand and profitability for the product coming out of the ground.
3. Not enough mines in the town- This is significant for building momentum in the local property market and long term tenure.
2. Not enough infrastructure spending Towns that will do the best over the long term (from an investment standpoint) have significant infrastructure spending in areas such as:
- Port, rail and roads
- Hospitals and schools
- Local shire development and beautification programs
- Property development such as hotels, apartment buildings, commercial buildings as well as house and land
1. Life span of the mine and the outlook for the relevant mining sector – When conducting risk analysis in a given mining area we need to be concerned with questions such as the long term mineral price forecast, the long term demand forecast and what is in the pipeline.
Forget the Budget. 106,000 jobs in 4 months is more important – Peter Switzer
Peter Switzer explains that despite all the fuss about the Federal Budget the great news is the fact that 106,000 jobs have been created since New Year’s Day!
The unemployment rate was steady at 5.8 per cent in April and the number of jobs created was 14,200 — all full-time, which is another positive sign.
What I like about the four months of job creation is that it underlines how pathetic we in the media can be when we give so much oxygen to bad news stories, such as the end of Holden, which would only directly affect 3000 workers, with these job losses between now and 2017. Sure, there have been guesses that 50,000 in the industry could be affected, but these are union and industry speculations.
The facts are that we have created 106,000 jobs in four months. If you don’t trust the Australian Bureau of Statistics, let’s call it 50,000. That number is still impressive and good reason to be positive on our future.
I hear nincompoops on radio talking about how bad our economy is. I suggest these people go to Athens to get an idea of what a crushed economy looks like.
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:
SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST
Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.
PREFER TO SUBSCRIBE VIA EMAIL?
Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.