HOUSING AFFORDABILITY FOR FIRST HOMEBUYERS

HOUSING AFFORDABILITY FOR FIRST HOMEBUYERS

Lately there has been much said about the supposed high price of homes making buying unaffordable for first homebuyers.

At the risk of sounding like a spoilt baby boomer who had it so easy, I beg to differ.

When my wife and i got married we were fortunate enough to be able to move into our own home straight from our honeymoon.

We built our first home on a modest block in Gosnells.

In order to buy it I had to have a 10% deposit and the cost of the house and land was 5 times my annual income.

Here is where the difference arises.

It consisted of a 120 square metre 3 bed 1 bath house with lounge, dining, kitchen, meals area and a built in robe to the main bedroom.

Now for what it didn’t have.

It lacked floor coverings, window treatments, light fittings, driveway, carport or garage, fencing, landscaping, patios, pergolas, air conditioning, fencing, or anything else.

We endured 2 winters on the concrete raft while we saved for the floor coverings and window treatments.

In the Rockingham district there are plenty of homes including extras available for 5 times a first home buyers income, but they aren’t prepared to accept such a modest start.

There is one other difference.

We had no credit cards.

Ross Cutten

Owner / Director

Noble Real Estate

THE HAPPINESS INDEX AND THE IDEA OF CHOICE

THE HAPPINESS INDEX AND THE IDEA OF CHOICE

I saw a new item on TED yesterday in which researchers had scored countries in terms of their level of happiness.

It was fascinating to watch and Australia surprisingly seems to rank only in the middle of the countries studied.

I also saw a programme on the ABC called Big Ideas featuring a discussion which also touched on the development of cities and people’s sense of attachment to the place where they live. The programme also mentioned people’s happiness and their sense of belonging to a community or place.

They mentioned something which has dawned on me as I have grown older and that was how people’s sense of happiness and their sense of having choices are related.

Quite some years ago I was trying to discover a simple key to what all human beings have in common and what it is that everyone is pursuing.

My conclusion; Everyone wants to be happy.

It seems simple enough except that everyone’s idea of happiness is different.

So, the conclusion I came to is that most people complicate this too much- simply find what makes you happy and do more of that- discover what makes you unhappy and do less of that.

When I have talked to people about this in the past they react in predictable ways.

Most often they provide me with a list of HAVE TOs.

You know the sort of thing, “I have to go to work, I have to take care of my kids”.

Lou Tice of The Pacific Institute pointed out years ago that you don’t actually have to do anything- life is a choice. The only thing you truly have to do is take up space. ( I am always happy to discuss these ideas directly).

The older I have become the more I am convinced that the happiest people are those who FEEL they have a sense of control over their lives and are able to choose they way they live.

If you are going to measure the success of your life by what other people are buying, doing, or pursuing then you will have no sense of control because the source of your motivation lies outside your choices. You will be a slave to others choices.

I am currently staggered by the sense of lack that exists where I live in the most prosperous times in the most prosperous State in the best country in the world, both economically, politically and socially.

How does all this relate to property?

When you are renting a home rather than bought, you cannot develop a sense of belonging to a place because, if the owner wants his property back, you are obliged to move on.

In my opinion one of the best places to start developing a sense of control is to put down roots in a place that feels like home.

Ross Cutten

Owner / Director

Noble Real Estate

LETS GET REAL ABOUT BUYING OVER THE WEB

LETS GET REAL ABOUT BUYING OVER THE WEB

I heard a discussion recently on a community radio station about how people could and were buying products increasingly over the web and the conversation concluded with the announcer declaring that retailers would “...just have to get their act together”.

I recently made myself fairly unpopular with some friends who were discussing how much cheaper they could buy motor vehicle parts from the USA and were grumping about how they were being ripped off, when I pointed out some of the realities of being an employer in Australia.

In our modern, fast paced world it seems few people have time to look behind the quick sound bite or headlines to explore what is actually going on.

First some reality about competition if you are in the business of retailing...the only means you have of competing is on price.

So let’s look at how uneven the playing field for our retailers compared to the USA.

The minimum wage in the USA Federal $7.25/hour Highest state Washington $8.67 for a 40 hour week.

Australia’s is $15.51 for a 38 hour week.

With close to parity in the dollar that means we get paid twice what workers in the USA get.

Annual leave USA under Federal law reqirements........none Usual 10 days annual leave.

Australia 20 days plus 10 public holidays plus annual leave loading 17.5% (non-existant in the USA).

Sick leave.....USA no entitlement.

Australia 10 days including compassionate leave extending from grandparent to grandchild.

Not many people can explain long service leave here in Australia even though all workers have the entitlement so I will explain.

When Australia was being settled there was no local people qualified to run things such as public works or water supply so they had to be recruited from The dear old mother country, the UK.

As an inducement these employed were guaranteed 6 months Long Service Leave every 6 months.

Why 6 months?

So they could take a trip by boat taking 6 weeks to get “home”, have 3 months at “home” and take 6 weeks to sail back.

This leave entitlement still exists even though almost no-one calls England “home” and you can be there in 18 hours by jet.

We have not yet considered maternity leave nor some of the myriad other occupational health and safety laws, unfair dismissals or other laws imposed on Australian employers that many other countries are not subject to.

Please don’t misunderstand, I am not suggesting we reverse the benefits we have.

I am simply saying that before you criticise local retailers you had best take another look at how difficult it is for these traders to compete and recognise that the playing field is far from level.

We also need to understand that the way a modern economy works each of us needs to have our customers employed to sustain our own standard of living.

If you are buying from overseas under $1,000 GST free that is 100.00 not going to your tax office.

Ross Cutten

Owner / Director

Noble Real Estate

THE AMAZING EFFECT OF TODAY’S MEDIA

THE AMAZING EFFECT OF TODAY’S MEDIA

I have been selling real estate in the Rockingham District since 1984.

When I started a typical well presented home in the Rockingham Park home was selling for around $55,000.

My father, who was in real estate for 42 of his 50 working years told me he could have bought land in Applecross just after WW2 for 50 pounds ($100).

I have just read the latest presentation from the Perth Chamber of Commerce and Industry on the future for Western Australia showing economic growth in India of 37% since June 07 of 37%, China 31%, Western Australia 23%, Australia 11% as opposed to the USA with 1% and Japan with -5% and yet people are more fearful than at any time I can recall.

I believe the level of fear is mainly attributable to the incessantly negative forecasts in the media, principally from economists who have predicted 28 of the last 3 recessions. They are the modern equivalent of Chicken Licken, running around telling us the sky is falling. My beef with them is that there is no accountability when they are wrong.

Stand by for the shocking truth....No-one can predict the future (even with a degree in economics).

Perth’s most famous valuer predicted in 2004 that the market had peaked and advised against buying. In fact the market ran on for a further 2 years.

In London and New York prior to the turn of the 19^th century all the doomsayers were forecasting both cities would drown in a sea of horse manure. How could the forecasters be expected to foresee the internal combustion engine?

Warren Buffett is quoted as saying “When people are fearful be greedy” but buyers are still sitting on the fence, I presume thinking that they will buy when the media report the market has moved up. Do they fail to realise that sellers will see the same reports and therefore will be more confident of achieving a higher price?

In the very latest news from REIWA sales are up 25% from 4 weeks ago and 34% from one year past. First home buyer demand is up 10% and is higher than any time since March 2010.

Is this the beginning of a new trend?

I have no way of knowing, but certain facts hold true.

W.A continues to receive 1,000 people per week from interstate and overseas migration.

Home building has been subdued below normal for some years.

Our rental property vacancy factor continues to be extremely tight indicating continuing solid demand (people have to live somewhere), and rental returns on recently purchased properties are showing 5% gross return or above.

Humans still buy food, then clothing, then shelter in that order and for shelter they have only 2 options....buy or rent. Either way they must be housed and cannot delay the decision.

Real Estate continues to be much safer than shares. A company can go broke and the shares become valueless. That cannot happen with housing.

So, are you going to move like Warren Buffett or wait for the herd?

Ross Cutten

Director

Noble Real Estate

RISK VERSUS RETURN

RISK VERSUS RETURN

The current Real Estate market (as well as the share market) will prove to be another shining example of why the rich keep getting richer and the poor keep getting poorer.

Throughout history it has been a truism that the riskier the venture, the higher the return.

Lessons can be drawn from history from the Spanish Conquistadors chasing gold and silver in South America to indentured workers promised land in America.

That is why the returns from depositing cash in the bank will always be less than other forms of investing. The other enemy of cash deposits is inflation (Do you understand the rule of 72?).

By far the majority of people fail to understand that doing what appears to be the safe thing and turning assets into cash when prices are down, increases greatly the risk that they will miss out when those assets rise again in value. (Remember cash ONLY depreciates through inflation, it can never be worth more than the face value deposited).

Again, historically, people have demonstrated time and again that they suffer from a herd mentality. The reason is fear.

I encourage you to separate yourself from the herd.

The first thing you need to understand is the difference between investing and speculating.

Just ask yourself if you believe that BHP Billiton or one of the big four Australian banks actually lost as much as 4% or more of their true value in a single day during the recent herd panic on the stock exchange.

Another reason to acquire real estate is that it doesn’t lose 4% of it’s value in a single day and has always increased in value. The reason is that it is a finite resource. In other words, “Get into Real Estate son, they’re not making any more of it”.

Want to discuss these ideas further? Call Ross on 959 22 222.

Ross Cutten

Director

Noble Real Estate

WHO IS ABRAHAM MASLOW AND WHY IS HIS BOOK IMPORTANT?

WHO IS ABRAHAM MASLOW AND WHY IS HIS BOOK IMPORTANT?

Number two in a series on planning your life goals

Abraham Maslow had a PhD in Psychology and from his research into human motivation he designed a five stage pyramid in which he outlined how human beings would always satisfy their needs.

It has become known as ‘Maslow’s Hierarchy of Needs’.

http://en.wikipedia.org/wiki/File:Maslow%27s_Hierarchy_of_Needs.svg

It is fundamental to human behaviour and is forms the basis of my belief that a roof over your head should be number three on your list of priorities right after food and clothing.

Despite the fashionable talk of renting rather than buying the fact remains that at the end of everyone’s working life they need to own their own residence if they are to live a comfortable retirement.

So target you owning your own home first.

Noel Whittaker, one of the most level headed investment advisers appearing in the newspapers today, says that there is no more tax efficient investment than paying off your own mortgage.

Why?  Because you are paying your mortgage in ‘after tax’ dollars.

If your tax rate is 30% and your mortgage is $1,400 per month you need to earn $2,000 per month to pay the mortgage i.e. $2,000 earnings less 30% tax or $600, leaves $1,400 to pay the mortgage.

So before you start chasing investment properties, stop and consider the ideas above.

You will not get that advice elsewhere.

Ross Cutten

Director

Noble Real Estate

ANOTHER WARNING FOR SELLERS

ANOTHER WARNING FOR SELLERS

If you are about to list your home for sale it pays to ask about any further fees which you may be liable for.

It would appear that some agents are not satisfied with just charging a commission but are looking to charge sellers for many varied sundries.

The latest we have heard of is a seller being told she would need to pay $66 to have an ‘Under Offer’ sticker placed on her for sale sign.

This is a first for us as we have never heard of that one before.

Far from charging to use an ‘Under Offer’ sticker we do not use them.

Call one of our reps to find out why if you are curious as it is not up to me to educate our competitors.

So “Seller Beware”, read all the paperwork or make sure you fully understand the whole cost of listing for sale.

Ross Cutten

Director

Noble Real Estate