Newsletter Issue 26

Our clients are always interested in the state of the market because it affects us all in some way. The question home owners always want to know is whether their property has increased in value, leveled out or even fallen in price. Home buyers, on the other hand, want to know if they have to save more before they can buy or if homes are becoming more affordable. There is also so much conflicting information about, that a true assessment is difficult.

At present, we appear to be in transition from a sellers market to what may be termed, a balanced market. A balanced market is one where there are approximately as many sellers as buyers. Prices also tend to level out in a balanced market. Most industry experts and economists are predicting a solid twelve months ahead because of a strong economy and low interest rates. Even if interest rates move up by .25% (the most common prediction for the next six months) this should have little affect on the market.

It's prudent to bear in mind that there are always pockets in the market where values are increasing or dropping due to local or demographic issues, but more accurate predictions look at the overall market and macro-economic factors.

Of course, the media is well known for attention grabbing headlines that say that property values are dropping, for example, when a more detailed analysis will highlight special circumstances.

A well-known example of that is when there was an over supply of inner city apartments in Victoria recently, which caused a sudden fall in prices. The media interpreted this as a fall in the overall market. Two ironies from that scenario are that smart investors are now buying up inner city apartments in Victoria at rock- bottom prices, and that apartments in other areas such as Tasmania, are only just beginning to experience demand from baby boomers and investors, and the supply is low.

Yes, it's time again to pick a winner. This time Jeffrey and Angela James will enjoy a weekend away at Hobart's Grand Chancellor. Mr. and Mrs. James are clients of Peter Harper's and Peter was very excited when he told them of their win. Congratulations Jeffrey and Angela.

A first grade teacher collected well-known proverbs. She gave each child in her class the first half of a proverb and asked them to come up with the remainder of the proverb. It's hard to believe these were actually done by 1st graders, but there are some good ones nonetheless - their insight may surprise you.

• Better to be safe than . . . punch a 5th grader.
• Strike while the . . . bug is close.
• It's always darkest before . . . Daylight Savings Time.
• Never underestimate the power of . . . termites.
• You can lead a horse to water but . . .how?
• Don't bite the hand that . . . looks dirty.
• No news is . . . impossible.
• A miss is as good as a . . . Mr.
• You can't teach an old dog new . . . math.
• If you lie down with dogs, you'll . . . stink in the morning.
• Love all, trust . . . me.
• The pen is mightier than the . . . pigs.
• An idle mind is . . . the best way to relax.
• Where there's smoke there's . . . pollution.
• Happy the bride who . . . gets all the presents.
• A penny saved is . . . not much.
• Two's company, three's . . . the Musketeers.
• Don't put off till tomorrow what . . . you put on to go to bed.
• Laugh and the whole world laughs with you, cry . . . and you have to blow your nose.
• There are none so blind as . . . Stevie Wonder.
• Children should be seen and not . . . spanked or grounded.
• If at first you don't succeed . . . get new batteries.
• You get out of something only what you . . . see in the picture on the box.
• When the blind leadeth the blind . . . get out of the way.
• Better late than . . . pregnant.

The average age of the first time property investor in Australia is 43 years. At a time when people feel life is becoming "easier" (children may be grown up and able to look after themselves, the home mortgage may be paid off, and income has reached a level which provides for a comfortable lifestyle), the fear of returning to a time when debt was large can be very scary. In fact this can be one of the major obstacles on the path to property wealth.

The solution: Prospective investors who find themselves concerned about debt should seek advice from property experts who are able to explain (in plain English) tax benefits of property investment, financial issues, the management process and other related issues.

The result, to quote a recent first time investor:

" When it was explained to me that, with good tenants and the added tax benefits we would not have to put much of our hard-earned money into paying our investment property off, I felt a lot better.

I understand there may be hiccups along the way that will cause my heart to beat a little faster, but in the long term we will own a property that has increased in value, which is a way of building a more comfortable lifestyle for myself and my family when it's time to retire."

There's a groundswell of change on the horizon. It's a gradual shift, but one which is already being felt by home builders in the USA. It seems more and more retirees are spending big money on big houses. The shift from the low-maintenance retirement homes to homes with opulent architecture, luxury finishes and lifestyle advantages, has a lot to do with the increased wealth of today's retirees.

People raised in the depression era or during World War II, when things were scarce, were subjected to a frugal upbringing which has influenced their spending habits their entire lives - the main rule seemed to be, the less you spent, the better.

But those born after the war were exposed to the unprecedented extravagance of post-war abundance. They learnt their spending habits from their parents who enjoyed full employment and record income levels. And now, as they reach retirement age, they are choosing to spend a lot of money on their retirement home.

Another interesting fact is that today's retirees are no longer staying in the family home or even in the same suburb. In fact, it has been estimated that 55% of future retirees in the USA will move and 30% will make a distant move.

So why the change? It is most likely because they have already lived in many places, so they're not tied to a single house or community as their parents were and their children and grandchildren are likely to be strewn across a wide geographic area, so they're not as inclined to stay put for family reasons.

Today's retirees received better educations, travelled more, owned more homes in more places throughout challenging careers and earned more money. They demand more satisfaction out of life and have the energy, education and affluence to pursue it.

According to one US developer, once upon a time all seniors in the USA wanted was golf, but they didn't want to pay for it. Today's retirees want golf and much more. They want a greater sense of community, they want to be near younger people and they need to be connected, either through employment or volunteerism. It's likely this shift in retirement living will become more pronounced over time and could mean major changes to the way we retire here in Australia.

Every body has neighbours. While some neighbours can seem distant and elusive, others can be a great support and may even become lifelong friends. So what are the benefits of creating and maintaining good relationships with your neighbours and what steps can you take to ensure you're a good neighbour?

There are many benefits to having good neighbours; some of these include:

• They can offer support in times of trouble and hardship.
• They can be a good link to the community. This can be especially important if you've moved into an area you've never lived in, or if you're living alone.
• They can keep an eye on your house and perhaps mind your pets when you go away.
• If you have children, your neighbours may be able to baby-sit for you.

If you want to be a good neighbor there are a few important points to remember:

• The biggest complaint between neighbours is noise. Good neighbours are aware of the level of noise they are making, especially when windows are open. For example, if you have wooden floors and live on the upper level of an apartment building, try not to wear shoes that make a lot of noise when you walk around.
• Keep outside lights off if they are close to neighbours' windows.
• Don't put your television or stereo on the wall dividing you and your neighbour.
• Let neighbours know well in advance if you're going to have a party or undertake renovations.
• If you are new to an area, make sure to introduce yourself to your neighbours once you have unpacked and settled in.
• If you have a house warming party to show friends and family your new home, invite your neighbours along as a way of getting to know them better.
• If your neighbour is going away, offer to collect their mail and mow their lawn to make sure the house doesn't look empty. You could also offer to park your car in their driveway so the house looks occupied.
• Make sure your yard is kept reasonably tidy - especially if your neighbours are in a position where they can look down into it.

Whether you're living in a suburban area or a city apartment building, it's not hard to be a good neighbour. Following these few simple rules is a great start, but better still, go and say hello to your neighbours. You never know, they may become life long friends.

I recently attended an Australia-wide conference where an economist from BIS Shrapnel presented a two-hour lecture on future market conditions state by state. Most of us have a love/hate relationship with economists - loving them when they tell us news that we like, and not liking them so much when they forecast unfavourable circumstances. Of course they are not always right, because no one can accurately predict the future - there are too many variables.

There was one statement made however that is a truism - markets are driven by supply and demand. The Australian market overall will continue to be driven by net population growth. There continues to be more people moving into Australia than out. Some states such as Queensland will do better than most. Tasmania's population continues to grow but to maintain that our Government needs to continue to focus on jobs growth, particularly for the younger generation.

As usual, if you require clarification on any issues in this newsletter, contact myself.

Kind regards,

Noel R. Towns
Managing Director