Newsletter Issue 41

As the year 2008 is nearing its end we can look back on the most volatile period in financial markets for many years. It has been an emotional see-saw for many, including retirees - whether self funded or pension recipients – those nearing retirement, home buyers and investors and those every-day families struggling to meet mortgage re-payments.

Welcome news that the Reserve Bank has cut rates by another .75 points following on from the one percentage point last month, should help the family budget for those with mortgages and hopefully instill some confidence back into the market. There are further predictions of another cut in rates when the Reserve Bank meets in December. This will be warmly greeted by the market and with the increase in the first home owner's grants for both new and established housing, it is becoming easier for home buyers to once again enter the market.

With continued pressure on rents, lower interest rates and falling house prices, investors are likely to re-enter the market as yields are improving. Some economists are predicting further larger falls in house prices but are at odds with many other market commentators. Even though prices have fallen recently, it is difficult to foresee this trend continuing, with money becoming cheaper, government assistance to home buyers, and - over the longer term - an under-supply of housing to meet an ever increasing demand.

Our randomly selected winner for a weekend away at Hobart's Grand Chancellor is James Dunlop. James remembers receiving a call from our client services department recently, requesting permission to enter his name in the draw. He couldn't believe his luck when he actually won. Congratulations James and we sincerely hope you have a great weekend away.

HOW DO YOU DECIDE WHO TO MARRY?

• You've got to find somebody who likes the same stuff. Like, if you like sports, she should like it that you like sports, and she should keep the chips and dip coming. - Alan, age 10
• No person really decides before they grow up who they're going to marry. God decides it all way before, and you get to find out later who you're stuck with. - Kristen, age 10

WHAT IS THE RIGHT AGE TO GET MARRIED?

• Twenty-three is the best age because you know the person FOREVER by then. - Camille, age 10
• No age is good to get married at. You got to be a mad to get married. - Freddie, age 6

HOW CAN A STRANGER TELL IF TWO PEOPLE ARE MARRIED?

• You might have to guess, based on whether they seem to be yelling at the same kids. - Derrick, age 8

WHAT DO YOU THINK YOUR MUM AND DAD HAVE IN COMMON?

• Both don't want any more kids. - Lori, age 8

WHAT DO MOST PEOPLE DO ON A DATE?

• Dates are for having fun, and people should use them to get to know each other. Even boys have something to say if you listen long enough. - Lynnette, age 8
• On the first date, they just tell each other lies and that usually gets them interested enough to go for a second date. - Martin, age 10

WHAT WOULD YOU DO ON A FIRST DATE THAT WAS TURNING SOUR?

• I'd run home and play dead. The next day I would call all the newspapers and make sure they wrote about me in all the dead columns. -Craig, age 9

WHEN IS IT OKAY TO KISS SOMEONE?

• When they're rich. - Pam, age 7
• The law says you have to be eighteen, so I wouldn't want to mess with that. - Curt, age 7
• The rule goes like this: If you kiss someone, then you should marry them and have kids with them. It's the right thing to do. - Howard, age 8

IS IT BETTER TO BE SINGLE OR MARRIED?

• It's better for girls to be single but not for boys. Boys need someone to clean up after them. - Anita, age 9

HOW WOULD THE WORLD BE DIFFERENT IF PEOPLE DIDN'T GET MARRIED?

• There sure would be a lot of kids to explain, wouldn't there? - Kelvin, age 8

HOW WOULD YOU MAKE A MARRIAGE WORK?

• Tell your wife that she looks pretty, even if she looks like a truck. - Ricky, age 10

On Census night in 2006, the homeless population in Australia was 105,000, according to an academic report released recently by the Australian Bureau of Statistics (ABS).

Counting the Homeless, 2006 (which includes data from the 2006 Census and other sources) found that absolute homelessness, such as sleeping out or in an improvised shelter, accounted for 16 per cent of homelessness in Australia.

Most homeless people were sheltered somewhere on Census night, with 45 per cent staying temporarily with friends or relatives, 21 per cent staying in boarding houses, and 19 per cent staying in supported accommodation (such as hostels for the homeless, night shelters and refuges).

The majority of homeless people were single (57,182 people or 55 per cent), while 20 per cent were couples without accompanying children and 26 per cent were in homeless families with children (7,483 families).

In 2006, more than two-thirds (67 per cent) of the homeless population were adults over 18 years of age, with 12 per cent under 12 years of age, and 21 per cent from 12 to 18 years old.

The authors of Counting the Homeless, 2006, Chris Chamberlain, Director, Centre for Applied Social Research at RMIT and Associate Professor David MacKenzie from the Institute for Social Research at Swinburne University, state that while the different categories of homelessness are useful in describing people's housing situations on Census night, transience is the typical pattern of homelessness in Australia, meaning many homeless people experience different states of homelessness.

Their research found that the number of homeless youth aged 12 to 18 years decreased from 22,600 in 2001 to 17,891 in 2006, a decrease of 21 per cent.

In 2006, there were 26,790 people in families, an increase of 17 per cent on the 2001 figure. There was also a 10 per cent increase in the number of homeless adults outside of families. This was the largest group with about 60,000 people on Census night.

Understanding their right to vary their loan under conditions of 'hardship' could save some home owners anxiety and the possibility of defaulting on their mortgages, according to consumer body Choice.

Under the Uniform Consumer Credit Code, those in temporary difficulty with a loan can apply for an extension to the loan term or reduce regular repayments - but a recent Choice report shows that many borrowers are unaware of this right.

While opinion is divided about how widespread mortgage stress is, figures show that repayments on new loans as a percentage of household incomes are higher now than in the past twenty years.

"A responsible lender will make defaulters aware of all their options before moving to repossess their homes but many people don't know about this facility and the law doesn't require lenders to explain it," said Choice media spokesman Christopher Zinn.

"If a lender refuses you a hardship variation, you can still have the matter heard by a relevant court or tribunal and, if they are a member, complain to an external dispute resolution scheme."

Choice says if you miss a repayment, contact your lender and a financial counselor immediately to explore all of the options.

"Avoid a situation where your lender could repossess your home, as mortgagee sales are often well below market value as well as highly distressing," he said.

Choice's tips to avoid mortgage stress include making sure you have your lender's best rate, perhaps with a more basic but cheaper loan, or extend the loan term - keeping in mind that while repayments might be reduced in the short term, the total interest bill will be higher in the long term.

First home buyers have received a double shot recently in the form of reduced interest rates and the launch of the Federal Government's First Home Saver Accounts (FHSAs) scheme.

Under the scheme, the Government will contribute an extra 17 per cent on top of funds deposited into the First Home Savers Account up to the value $5,000, a potential contribution of $850 per year. The accounts are available to anyone aged 18 to 65 who have not previously owned a home, and contributions can be made by the account holder or another party.

The Real Estate Institute of Australia (REIA) welcomed the implementation of the First Home Savers Account and urges those aspiring to own their home to consider opening an account.

"The First Home Savers Account will provide a platform to increase the number of first home buyers with the demand they will create for housing providing an impetus to increase the amount of new housing stock in the market" said the REIA President. Data from a recent Deposit Power/REIA Housing Affordability Report showed that the total number of first home buyers in the market in the June quarter 2008 had decreased 17% when compared with the same period last year clearly showing that some impetus was needed.

This new initiative will help to promote a culture of saving among a new generation of Australians that will reduce their reliance on debt in the future.

In order to open an account, contact your preferred financial institution to enquire whether they will be offering the product, otherwise a list is available from the Australian Prudential Regulatory Authority (APRA) website at www.apra.gov.au.

As I finish this newsletter the latest news bulletin is announcing that Barack Obama appears to have won the presidential election in the USA. The world will watch with interest as events over the coming months unfold, and we see how the Democrats and Obama's policies translate into the market place.

It has often been said that America sneezes and the rest of the world catches a cold. It is certainly true with America being a world super power, and having such a massive economy, that U.S policy decisions have a direct impact on the rest of the world and Australia cannot escape unaffected.

In the meantime, it is to be hoped that we can look forward to a prosperous 2009 and will see a return of confidence to the market and hopefully benefit from good policy decisions by our own state and federal governments to see us through some challenging times to come.

As usual if you have any comments or questions, do not hesitate to contact me.

Regards,

Noel R. Towns
Managing Director