Thursday, August 27, 2015

Happiness is...

This has nothing to do with PF. It's another random post musing and mulling over life.

Thus far in this life, I have met two people who have been unhappy with their life. Always sad and prone to regret something that they have or haven't done.

Prone to introspection and self reflection, I have thought about why some people are so unhappy with their life to the extent that they are miserable and discontent. I think about the wonderful brevity and transiency of youth being wasted on the young and unappreciated. 

We can choose to live our life in contentment and happiness or we can choose to live the very same life that we are given in discontent and unhappiness. Which one will you choose? 

I love RAKs. The random acts of kindness from strangers who help you carry heavy items, who give way to you in peak hour traffic, who smile at you, who offer you to proceed ahead of them in check out lines because they have a full trolley. Who get up and stand so that you can sit down. The list is fortunately endless =)

So I thought I'd start my weekend off with what happiness is to me and I hope if you are reading this, you will also start your weekend off with a list of things that make you happy and appreciate the beauty of life =)

1. Spring is coming, cold Winter dreary days are becoming more infrequent. Our garden is bursting into life with Tibouchinas, Daisies, Clivias and Arum Lillies, herbs popping up from seeds and buds of the Hydrangea blooming. Makes me happy:

2. Celebrating the joys of this winter by going on ski trips with family and friends makes me happy (except for the long queue for lifts lol). Check out the beautiful and awesome vista:
3. Being able to find time to cook and indulge in food fantasies makes me happy:
Bean sprout salad:
 Pickling baby cucumbers in a sugar, salt vinegar mix and throwing in some chillies and coriander seeds for variation:

 Pickling long green chillies:
 Madly creating and throwing together variations of salads even though it's winter:

3. Making time to blog again =)

4. Really enjoy the old skool way of charcoal barbecuing compared to just using the gas barbeque all the time =) :




5. Eating an entire box of Krispy Kreme donuts all by myself without giving a single thought to how fatty or cholesterol laden the fatty blobs of goodness are =)


Overall, spending precious time with family and friends makes me happiest. Being able to indulge in interests and hobbies makes me happy. Being able to work as much as I like makes me happy (workaholics can rejoice). Learning something new everyday makes me happy. 

I hope this inspires you to think about the things that makes you happy too. I feel so blessed in this life to have such amazing and wonderful family, friends and acquaintances from work and in the wider social context. Life is too short to be grumpy and unhappy =)

Thursday, August 20, 2015

We Bought Apple Stocks: Apple Inc Nasdaq: AAPL


We bought a few thousand dollars worth of Apple stocks (Nasdaq: AAPL) on 23rd July this year. (Sorry have had to edit some figures out due to privacy issues, ironic given this is a public blog =) )

My first direct international stock purchase and what an experience. The amount of paperwork that I had to complete just to get to that stage. 

I won't even mention that I wanted to buy Google Class A stocks but due to the broker stuffing up, I didn't get my order executed before their price kicked up after reporting positive results. Sigh. $16k worth of profits and gains down the drain.

Why did we buy Apple and want to buy Google? Those two stocks have always been on my to-do and to-buy list for years and years! If we had bought them years ago, we would have been multi-millionaires from just holding two stocks. This guy I once knew(let's call him Mr Cantankerous because he really is cranky and a cantankerous type of guy) shared his opinion with me, saying that he believes Apple Inc has had its heydays and the glory days are pretty much over.

My opinion is that this is still early days yet for technology. Apple and Google are well placed for future technological development and they both have such good business models for producing revenues and future growth potential from innovations. They create their own market simply due to their mammoth size and the free marketing they both receive. I could launch into the technicalities but let's leave that for another day before this post is too long.

Apple is the largest capitalised stock in the world at $655 billion. With over 200 billion dollars in cash savings. Cash savings! Ridiculously good savings. Now if only shareholders can all unite and request a special dividend...

Being an international stock for us, there are two market forces at play affecting returns. 
1) The stocks' price volatility (AAPL stock prices swinging up and down)
2) The foreign currency volatility (AUD weakening and strengthening against the USD)

I'm not one to be concerned about any of these short term fluctuations. In the long run, Apple is innovative just like Google, the history of these two companies having split their stock several times over the years is ample evidence. A pessimist would be at this point saying that history is not indicative of future performance, that is certainly true. However, after having regretted not buying either Apple nor Google over these years on multiple occasions, I am over regrets and will roll the dice on buying these two stocks this year.

Seriously $200 billion in cash savings which exceeds the GDP of Peru and the Czech Republic, it exceeds the total net worth of Bill Gates, Mark Zuckerberg, Jack Ma and Warren Buffet combined (cnbc.com 2015). I'll be happy to sit on our Apple stocks for the long run and see where it takes us. I've never been the type to dwell on short term volatility in stocks or the property market if I'm not day trading or in the business of trading properties. I am all about the long run and the next 30 years. This strategy has worked very well for us across both asset classes over the past few years. 




Currently AAPL'S chart is not looking illustrious(see above price chart) =) but it's a long term holding for us that we have added to our portfolio. I'll keep readers posted on its performance and how it is going for SMG with the two market forces at play. 

The United States is heading into a monetary policy tightening cycle (raising rates) so the AUD will be crumbling further as investors switch back to the greenback. There will be interesting days ahead =) 

The dividend yield for AAPL is rather low, however we are pursuing capital gains and not dividend yield. That's the goal with this AAPL acquisition =)




Wednesday, August 19, 2015

Open Letter to Fuji Xerox: Thank You For Your Amazing Response!


It's notoriously known that people like to give negative feedback and whinge on the internet. Positive feedback is a lot rarer. So I consciously like to give positive feedback and reviews on good service from businesses and from staff. 

Fuji Xerox and your support team for warranty. You have outdone yourselves.

If I buy another printer in future, it will be one from your company.

I bought a Fuji Xerox multi function printer two years ago and it started printing pages in magenta.

Despite our best efforts in troubleshooting the issue(trying new toners, re-installing software and drivers, rebooting and unplugging and re-plugging, trying to print with different laptops, trying to print from different applications etc), the printer was still printing pages heavily magenta in colour.

The printer was out of warranty, however after multiple attempts at troubleshooting from Mr Talented SMG, the problem remained and it was a write off. I was very happy that Fuji Xerox acknowledged that we had a unique issue that it was no fault of ours.

They sent me a brand new replacement printer that is even more awesome than the outgoing one that I had. Scans pages in seconds! Faxes pages in seconds. Being laser, the printed pages roll out as if they were participating in a downhill snowboarding race =)

So this is my open letter of thanks to you, Fuji Xerox. Because I know all companies keep track of what is being said about them online. And I want you to know what a pleasure it has been dealing with your support team and the outcome of our printer issues.

Author of SmartMoneyGuide.blogspot.com.au

SmartMoneyGuide Traffic and SEO

It's been a long time since I have posted regularly and I apologise for that. Google Analytics show that last month page views as you can see is at 7,091 with visitors looking at a few pages instead of 'bouncing' off after landing. I see visitors returning for repeat visits, so thank you for appreciating my writing and my thoughts.

That is positive feedback and why this blog is still on my mind after these two years of barely posting. 

All time page views is at 555,679. Over half a million visits and views. I guess it's not that much compared to a large site where the bloggers are actively working on growing traffic. But compared to the days when I first started and got excited when I got 10 unique visitors lol. And then 500 visitors lol. And they weren't family and friends back then because I never let any of them know that I had a blog! It was a little hobby of mine.

I have approximately 265 posts so 555,679 views on only 265 posts. Imagine the traffic if I had 2000 posts. If you blog and wish to grow your site, the more posts you write, the more visits, the less potential bounce and the more repeat visits. It's a positive cycle. I dont' really think about traffic when I blog though. It's more about exploring my ideas, my creativity and my interest in personal finance and how it can help us obtain that illusive financial freedom at a younger age, than waiting to retire at 65 years old.

Much has been happening in my life and investment wise. I hope to take readers through some of the exciting changes and investments that I have made recently and plan to make. If readers had taken action on my thoughts and posts from two years ago when I wrote about property, they would have been millionaires too. 

Forecasts and expectations have been realised and I'm happy to say that I haven't dished out bad advice ...yet lol. 

SEO wise, the more I write, the more visitors and the more networking, the more visitors. But organic growth on this site is pretty good and even though I rarely posted these last two years, Google has been favourable with directing traffic to this site. Thanks Google!

But Google will keep sending traffic if the post is relevant, informative or of use to someone. So I'm glad that readers have found interest and this site of use. I hope to write more often. I know I always say that but I will =) 

Here's to the last of 2015 with a bit more bang.


Friday, May 8, 2015

What Is Land Banking? Is It A Good Property Investment Strategy?

Land banking generally refers to the practice of buying land for investment purposes in the hopes or with expectations that the land will increase in value (capital price appreciation).

Whether it's a good or bad strategy really depends on:

1) Where the land is located and whether there is any likelihood of growing demands for that piece of land or that the land will be rezoned into higher density usage and therefore increase in value

2) The land's current or potential future use for income producing purposes

Growth in demand for land can result from subdivisions for housing estates, for industrial or commercial use and so forth.

I thought it's worth writing a post on land banking because it can seriously cripple your cash flow if you don't research the land before you buy and you don't prepare for the purchase from an accounting and tax perspective simultaneously.  

Failure to ensure that your land investment can produce an income as soon as possible will mean that all your related expenses won't be immediately tax deductible in that current financial year.

In NSW, Australia, if you buy land for investment purposes and the land is not producing any income, then all expenses such as loan interest, council rates, body corporate rates, water, maintenance and repair fees (such as repairing fences) cannot be claimed each year as tax deductions. They are added to the base cost of the land to reduce capital gains tax when the property/land is ultimately sold.

If you wish to buy land for investment purposes, the best strategy is to find one in a growth location (easy to say, hard to execute or else we'd all be billionaires), ensure that it can produce income in some shape or form so that your expenses are deductible in the year that they are incurred(this is very important from a cash flow perspective) and then cross your fingers in the hope that it will increase in value if you haven't done your research.

Some of our friends have practiced land banking rather successfully. They were delving into council development application plans, town plans, zoning plans and researching which rural areas were designated for growth corridors.

I do know someone who land banked unsuccessfully years ago. She bought a cheap piece of land in the bush that had no water, no sewerage, no power, no house, was rocky and dense with shrubbery and trees. Not only was it very difficult and very expensive to build a house due to the terrain of the land, but it was impossible to convert the land use to market gardening agriculture even if you bulldozed all the trees.

So building any housing structures were out, using the land for market gardening agriculture was out and using the land for grazing cattles or sheeps was impossible and unfeasible due to the terrain. What happened was that the land didn't produce any income, so she paid years and years of bank interest on the mortgage, paid fence repair fees and council rates faithfully without being able to claim anything as a tax deduction. The land was also in the middle of nowhere so there were no subdivision plans, no development plans and no demand for it so it didn't appreciate in value. It was only until she sold it years later, with no capital appreciation, that she was able to claim all the expenses that she had incurred over the years.

When evaluating whether land banking is a good investment strategy or not, given the right research and due diligence and forward taxation planning, it can be a good strategy. And if you fail to do any due diligence or research or planning, it can be a very poor one just like the one I mentioned above.




Tuesday, May 5, 2015

Don't Expect Results If You Don't Invest In Yourself

I am constantly surprised and baffled as to why some people just don't spend time on upgrading or improving their knowledge and skills.

Today was a classic case of people falling in the typical bell curve.

I had enrolled in a LF Forklift Licence course so that I could be licenced to drive a forklift around on my parent's farm and be covered by liability insurance in case I drive into something as a worse case scenario.

There were five of us in the class. Upon registration, we were told (and if you weren't told that, it was in the student handbook that you had to print out):

1. Print out your forklift training manuals
2. Read the training manuals beforehand a few times
3. Complete the questions in the manual
4. Complete the questions in the self assessment without looking at the manual and hand that copy into the training centre
5. Bring sufficient identification so that you can participate in the class

Today, this is what happened:

Person 1: Didn't bring sufficient ID. He lost his wallet a few weeks ago and brought in unopened utility letters and letters from the bank. (I was agog that they were not opened, as if he just grabbed them out of the letterbox). He didn't even know what type of letters they were but they didn't qualify. He didn't read the training manual beforehand and didn't complete the questions and didn't complete the self assessment that was to be handed in.

Person 2: He didn't read the training manual, didn't complete the questions, didn't complete the self assessment that was to be handed in. His written English wasn't that great according to his friends, but I'm surprised he didn't make triple the effort to learn the manual beforehand to compensate for his lack of written English skills.

Person 3: He didn't even print the training manual, let alone read it! He didn't complete the questions or the self assessment that was to be handed in. It's almost as if he just paid for the course, and then turned up on the day, ignoring everything else he was told.

Person 4: The only one on the top end of the bell curve. He not only printed two copies of the training manual, he had read the training manual beforehand so knew almost all the answers, he had completed the self assessment to be handed in and brought sufficient ID.

Person 5: Me haha! Of course I'd be at the top end of the curve ;p My practical forklift driving skills may be at the bottom end, but I did what I was able to do. I printed the manuals, I read beforehand, completed the questions, completed the self assessment, brought enough IDs and knew almost all the answers as well. Can't be too modest, right?!

Seriously though, I understand that driving a forklift can be considered a blue collar job but whether you are in a blue or a white collar job shouldn't distinguish how much effort you put into learning or obtaining skills. If any of my friends in the white collar industry (bankers, lawyers, IT consultants, programmers, accountants, dentists etc) had to obtain their forklift licence, I can say with 100% confidence that they would have followed the directions absolutely by the book.

They would have turned up on the day with 100% ID, printed off their training manuals and read it a few times, highlighted relevant points, made notes, completed all questions and if they couldn't complete the self assessment without looking at the answers, they would have studied the manual again. I can't say with confidence that they would pass the practical aspect of driving a forklift(without having practice) but I can say that they would have invested effort into achieving as much as they could to help themselves pass.

I have friends across various retail industries and professions, and I know we all fall into some section of the bell curve despite some denying that the bell curve doesn't exist. Probably for that reason, statisticians still have work and why we had to learn probability analysis.

But today, it was such a classic example of the typical bell curve that I thought I would write about it. It's been a long time since I was in such disbelief that people can turn up to a class and licence test without doing any preparation whatsoever and didn't follow any instructions or do any reading beforehand. I was just amazed.


Thursday, April 30, 2015

What Do You Wish You Had More Time For?

Time is that valuable commodity that you will never, ever get back. You could buy anything you want with money but the only thing we will never be able to buy is time that has already passed. Maybe someday in the future someone will design a time travelling machine, but unless that machine can bring your youth back, you'll only be that old person going back in time with that fancy time travelling gizmo.

When I told someone a long time ago that I had no spare time and that I was too busy, he said to me that it will always be too busy for everyone, but if it's important enough or you want it enough, you'll always make time for it.

Today, I found myself thinking and wishing that I had more time. Thinking and wishing about something is absolutely useless so I realised that I have to actively and consciously make time for what I want. Life gets more complex every single year and so those days of drinking and reading everything under the sky, lazy breakfasts and sun baking are all gone.

When I was younger back in 2009 I thought I had all the answer to time management which you can read because it is timeless and ever so helpful ;)  I even wrote posts such as, 'How to master time and not be a slave to it.' Five years later, I am so inundated with work, opportunities and investments in addition to more family members and more friends that the 'free' time that I had suddenly seemed as if it had never existed.

What do you wish you had more time for? Compile that list and then allocate the time to your list.

Here's mine to start things off:

I wish I had more time for:

1. Family and friends: The most important thing to me in this world is my family and friends. They are who keeps me sane, entertained and feeling loved. I will try to spend at least one day each week and some weeknights catching up with family and friends. Allocate time: Daily.

2. Work: I'm a self confessed workaholic. If I didn't have any family or friends, I would be working every single minute and hour of the day to the point where I wouldn't even sleep much. I work up to six and sometimes seven days a week. I am always trying to work smarter though. There are always ways to improve work and so that I can achieve more within the time framework. Allocate time: Daily (can't help myself there :p)

3. Learning new things such as programming and skilling up: I must make time to learn something new every single day. If we all learnt something new daily as early as we can, we have a whole lifetime to benefit from that new knowledge and time to apply the knowledge and skill to our benefit. I am reading technical books on IT, finance, accounting and agriculture daily and will commit time to acquiring new certifications and qualifications every single day. Allocate time: Daily

4. Keeping on top of social media: This one kills me. I find it so hard to find the time to reply to every single text message, watsapp messages, emails on five different accounts, Facebook posts/messages and friends' updates. Sometimes at the end of the week, I check what I haven't replied to and it's like 100 messages and it makes me happy that I have family and friends who care about what I'm up to, but it stresses me out somewhat that I can't reply to all of them promptly. I will try to find time daily to respond and stay on top of social media. Allocate time: Daily

5. Gardening: I love gardening and growing things. I try to commit at least 30 minutes three to four times a week for gardening. Allocate time: Every second day.

6. Blogging: Writing is a passion. People have asked me how and where do I find the inspiration to write about topics and things and I tell them that if I read, watch, hear or see something, my mind is always coming up with an idea, an opinion and wanting to give feedback, which is what inspires the writing. These last few years have been so busy that I haven't written as much as I would like to, so I am going to try to dedicate at least three hours each week for writing, whether it be on this blog or in replying to emails and correspondences. Allocate time: Every second day.

7. Cooking and trying new recipes: Trying new recipes takes effort in buying and locating ingredients. Long gone are the days where I would spend entire weekends trying all sorts of recipes and baking something. I have lots of cook books on the bookshelves gathering dust. I am going to try to cook at least two new recipes every week. Allocate time: Weekly

8. Craft work and designing: This is the more creative side that is always crying out for time. I always tend to relegate this to the back burner because it never seemed like such an essential thing but it is always relaxing when I spend time on more creative things.

9. Working on and executing ideas: My mind is always bursting with ideas on websites, writing, applications, business areas to try out and investing opportunities. These are the hardest areas to focus on because I always feel that I need quiet time to focus and brainstorm on the design and application of these ideas. I have no quiet time and not a single moment of downtime. I am always on the up and go. So I must make time at least once a week for a few hours to work on these designs. I am always making time for investing but not enough. Allocate time: 3 hours weekly

10. Watching TV series and movies: I just love TV shows and movies. Allocate time: Weekly

This feels almost like goal setting but it's not. Setting goals is different because it involves an end target, a specific end game and it's measurable. I do have plenty of goals which I haven't blogged about, but this post is more about finding time and time management rather than goal setting.

For each of the items above, if I were to write about goal setting, it would be something like, design and finalise two clients blogs by six months:

1. Design two new blogs for clients in the next three months
2. Test the blogs with the clients over four weeks for design and application
3. Take the blog live by the fifth month and review feedback from clients
4. Finalise blog design for clients by the sixth month

Well, hope you all compile your own list and commit time to executing the items on your list =)







Wednesday, April 29, 2015

Motto For Wealth: Maximise Income And Minimise Expenses

The story of how to get rich has been trampled over many times by writers, entrepreneurs and dreamers. Even dreamers know the theory but they don't actively apply the theories. For you to grow your wealth and find the holy grail of financial independence, you need to apply all these 'how to get rich theories'.

The very root of how to grow your wealth is really very simple.

Maximise your income by investing in your skills and abilities and therefore you can demand a higher price for your knowledge and skills. On the other hand, you minimise your expenses by actively reducing your spending or reducing your recurring expenses. 

I wanted to write about my most recent experiences about reducing recurring expenses. Most of us dislike having to review our insurance bills, our mortgage bills, having to change banks and calling up for quotes.

Having remained with the same bank and same insurance provider for years and years which led to complacency, over the last few months, I thought it was time to take a look at my expenses. A good thing that I did that because my current bank and insurance providers were really having fun at our expense.

1. Cheaper Insurance Policies

Mr SMG and I had seven insurance policies with our current insurer and they gave us a 25% multi-policy discount for having multiple insurances with them covering houses, contents and cars. The 25% 'loyalty' discount is fine and dandy but it really is rubbish when there are more competitive insurers out there that don't even offer the multi-policy discount when they quote but are priced competitively to try and get your business.

 A different major insurer offered the same comprehensive insurance at a few hundred dollars cheaper and that was for just one policy. By staying with the previous insurer over the years, they simply kept increasing our premiums every year citing, "there may have been increased theft in your area, there may have been more accidents in your area...blah blah blah." 

2. Cheaper Mortgage Interest Rates

Most of us are aware that there are different tiers of mortgage rates out there depending on how much you borrow, the calibre of yourself as a borrower and how much business your provide to your bank (the more fees they earn from you from investment products, the more they love your business). I did some research on the internet and read that some were offered up to 1.3% discount off the standard rate. So I went to ask for interest rate discounts above what we were being offered at 0.91%. It was like hitting a brick wall, "No, no, no, we've given you the best discount that we can offer.". 

If at first you don't succeed, you try and try again. So I asked again and then they offered me a 1% discount. A few weeks later, I asked again. I knew there were better rates out there. I was prepared to change my bank but it is rather inconvenient so if they offered me something more competitive, I would remain. I got referred to a personal banker. He obtained a 1.2% discount off our standard variable rates. That 1.2% discount over our current 0.91% discount is going to save us thousands and thousands of dollars across our multiple mortgage loans. Unfortunately I can't quantify it for readers since Mr SMG and I combined our finances. He is a lot more of a private person than I am. It took several visits and phone calls but it was worth it.

3. Question Your Bills and Expenses

This point is mainly for Australians and not for international readers. The NSW Valuer General does the valuation on raw land values every four years. If you own any property, you have to pay council rates. The council uses the Valuer General's figures on your land value to calculate the amount of rates that you have to pay.

Previously, our land was valued at $585k. That's just for the raw land and the dirt underneath our feet. The recent valuation last year came in at $827k. Which is ridiculous having looked at recent sales in our area last year. With a land valuation of $827k and if anything happened to our house and we had to replace our four bedroom house at $500k(for the same house size that we have now), that would value our property at approximately $1.3m plus. Last year, I thought that was out of the question so I wrote to object and they sent a personal valuer out to check out our land. The value was revised downwards to $780k which meant that we saved about $500 in rates payable. That email took 30 minutes to compose and send and it saved us $500.

Having noted recent sales however, the Valuer General's figure was probably spot on for this current market but it wasn't appropriate for the property market last year. We'll just have to take advantage of that for the next four years. Two weeks ago, a house near us sold for a ridiculous $1.7m plus figure and that was just insane but this is the crazy Sydney property market where insanity is the new norm.

The motto for growing your wealth is as applicable as ever. Before we focused on growing our investment income but didn't really focus on minimising expenses that much. It was only when I looked at our bills and realised that all our recurring providers were just increasing our bills beyond inflation and every single year did I realise that it was time to review other providers. It's not fun but it's something that needs to be done.

As the treasurer for one of our strata block properties, I changed the gardeners and cleaners who were charging us $18k for the year to one that charged us only $14k. The previous contractors were simply increasing their fees by almost $1k per annum. With the replacement contractors, the quality and standard of the garden and block is exactly the same. That saved $4k per annum for the past five years which is a $20,000 saving. That was just one aspect.

Don't accept everything that is given to you as fact or as something that you just have to put up with. Question it. Ask around for quotes and be prepared to change providers. Can't emphasise that enough.




Monday, April 13, 2015

Inspired By Meeting Rene Redzepi of Noma and Martin Boetz of Cooks Co-op

Inspiration. Passion. Effort and perspiration. Working smarter and working harder. All the things that I've been trying to implement in my life.

It's been two years since I have posted. Not because I haven't been inspired, I am inspired daily. However, it takes conscious effort to take the time out of our busy life to write a blog post.

A few weeks ago, I was so happy that I met Martin Boetz, a famous Chef in Australia. I've come across Peter Gilmore, the number one Chef in Australia, in the lift out of all places in the past but it doesn't compare to having a conversation beyond greetings! For those that enjoy their food, it's like meeting your idols.


Last week, I was so stoked that I met Rene Redzepi, the Chef of the Danish restaurant Noma. Noma is the number one restaurant in the world. I am so full of admiration for those who have worked so hard to learn, create, inspire and become the best in their field. It takes natural talent and also the ruthless ability to conquer politics and public opinion.

I've met other famous people but not really inspired enough to write about it. It's just that I was so inspired by Martin and Rene that it's sparked my interest to write again. They have such a passion for their field of food.

When I was avidly blogging all those years ago, I was contacted by politicians who wanted to have coffee and lunch, the Australian Internet Fraud Squad who was wondering if I could assist them in online fraud research, the Managing Director of Hermes(home of the luxury handbag retailers who charge $15k for their handbags), Karen Upton who threatened to sue me for defamation if I didn't remove my post about her financial woes. It's been an interesting ride but life got very busy.

Happy to say that I am back to blogging again, and I do thank Rene and Martin for re-sparking my inspiration and desire to write again for the public. Even though I haven't posted for two years, I was still receiving personal emails from those who had been touched and affected by what I had written. It does remind me that if readers are making the effort to contact me about my blog and posts, I should make the effort to blog effortlessly.

Here's to a glorious 2015 and beyond!



Sunday, November 17, 2013

First Home Buyer Crisis: Housing Affordability

There's been a lot of press lately on first home buyers being sidelined in this frenzied property market.

The Sydney Morning Herald(SMH) recently published an article, 'Home deposit hurdle won't clear itself', stating that out of new housing loan commitments, first home buyers only accounted for 6.8 per cent of buyers in September, down from a peak of 34 per cent in May 2009. First home buyers have been on the decline since the Government winded back their generous housing deposit grants.

The SMH also stated, "...in August(first home buyers) they made up just one in fifteen borrowers in NSW and one in eight borrowers in Victoria...house prices have risen faster than incomes over time-from 2.5 times the average disposable household income in 1985 to about 4.5 times last year, the Reserve Bank estimates...home ownership rates nationally have been in decline...the largest fall is among households in the 25-44 age bracket...the share of households owning their homes outright has slumped by more than 13 percentage points since 1995-96. Almost 35 per cent of the city's households are now renting."

According to RP Data, property prices in Sydney has grown by 13.2% in 2013.

Influential business owners, wealthy individuals, investors and politicians are likely to hold several investment properties, so there's very little likelihood of negative gearing being abolished. Negative gearing alone isn't really a great incentive. It's only useful if property price growth is appreciating more than the losses being incurred.

In another SMH article, 'Investors keep first-timers out of market as  prices surge', there were quotes from Nick Gunn, a first home buyer who had failed to buy a Potts Point apartment for $431k because he was out offered.  He says, "...I don't think I am likely to find anywhere that I can actually afford...there are a lot of us. Basically we sit around moaning about the same thing."

Of course he can find properties that he can afford.

Instead of buying in the heart of Sydney, he might have to look further out either West or South of the city. If he and his friends decide to sit around 'moaning' that they can't afford to buy a property because they only want to buy an inner city property, then that's not an issue of affordability.

If they keep moaning about it, even property further out from the CBD will keep on increasing in price and they will be priced out of both, inner city and outer city suburbs.

Why do first home buyers think that they are entitled to be able to buy their first home in very desirable suburbs and if they can't, then they complain and say that they can't afford to buy anything? They CAN afford to buy something, they just have to downgrade their expectations and look at upgrading later.