When it comes to planning for retirement, paying off a mortgage should be the cornerstone of security.

Question

I am a 49-year-old single female earning $61,317 a year. I pay a compulsory members contribution of 2 per cent to the Public Servants Superannuation Fund.

I have $96,000 in super and another $11,000 in a rollover fund. I have a $232,000 mortgage on a house in the outer suburbs of Melbourne with repayments of $910 a fortnight.

My preservation age is 58 and my Centrelink age pension age is 67. I was hoping to retire well before 67 as I am barely capable of working full time now.

I realise my super balance is inadequate to enable early retirement. In one year I will attain 10 years service and my employer will match my personal super contributions up to 10 per cent.

I receive $911 a fortnight net wages after mortgage, tax and super deductions, so I struggle financially.

If I increase my super contributions it will create even more hardship.

Should I increase my mortgage repayments instead of increasing the super, or a combination of both?

Should I get income-protection insurance and trauma insurance (reducing my net income further), to avoid calamity if I were to get sick? S.M.

Answer

Yes, you can’t go past the offer to match contributions up to 10 per cent and you need to take this up to the full.

However, you also have to put priority on being able to retire in a mortgage-free home and thus avoid a drain on your retirement income. At least you can then rely on the full-age pension to meet your daily needs.

At your current rate of repayment, it will take you some 17 years to pay off your mortgage, assuming an interest rate of 7.3 per cent. Alternatively, you could pay off a loan of about $155,000 over nine years or $130,000 over seven years.

You need to decide whether you can afford this property or whether you are better off relocating to a smaller unit. Or wait until retirement to sell and then buy what you can then afford without a mortgage, but you’ll pay bigger repayments into a bigger mortgage until then.

For now, open a mortgage offset and use it as your main deposit account so that, by using a 55-day credit card, you can keep as much money in there for as long as possible. It’s the most tax-efficient way to handle your money.

Some people suggest salary sacrificing to the maximum and thus getting a tax deduction, then withdrawing a lump sum at retirement and paying off the mortgage.

This may suit those in high tax brackets, depending on whether their super investments make or lose money, but you are already struggling and will be struggling more.

Rollover the benefit from your rollover fund into, say, the AGEST super fund and buy salary continuance insurance through super so as not to reduce the amount you can put into your mortgage offset account.

That, plus your sick pay entitlements will, hopefully, insure against any trauma.

If you have a question for George Cochrane, send it to
Personal Investment
PO Box 3001
Tamarama, NSW, 2026

Helplines

Banking Ombudsman, 1300 780 808
pensions, 13 23 00

Story source: www.domain.com.au, story by George Cochrane

Recycling your old electronics can be daunting and people often come up with convenient excuses to just throw out old equipment or leave them lying on the side of the road without any regard to the environmental impact and the impact on carbon emissions.

Firstly, you can simply recycle your e-waste. Gather up all your old electronics and take them somewhere to be recycled. Avoid council dumpsites and consider calling a business that specialises in e-waste recycling.

Secondly, give some serious thought to donating any old electronics you no longer use but are still usable and in good nick. You would be surprised by the amount of organisations that accept second-hand computers or equipment and find homes for these computers and electronics that allow communities’ to thrive and learn from what you no longer need. This is the type of recycling that benefits the environment and your community!

You may even find individuals who just love gizmos and gadgets to pull apart and experiment with, so don’t hold back with choosing what old electronics you want to give away.

Thirdly, if you’re motivated by monetary as well as environmental rewards, consider reselling your old computer gear. Before I go any further into this I’m going to point out that trying to sell equipment that isn’t up to scratch can be hard, plus if anything’s faulty you just cause yourself more hassle in  the long run.

That being said, good places to start your search for potential customers are eBay and other organisations that allow you to resell your old equipment. You’ll find there are businesses interested in purchasing your old laptop or pc gear as well, which tends to be a fast and simple exchange that’s convenient for both parties.

Also, consider holding onto your pc and electronics for a little while longer if you’re only considering disposing of them for the latest shiny new tech. You may find later on that you’re perfectly happy with what you’ve got for the time being and that you saved yourself some serious cash by not upgrading to the next model.

Finally, ask your friends and family if anyone is interested in scrounging through your box of wires and keyboards for anything they may want. This can be a great way to get some more use out of things that could have been otherwise wasted. Posting on Facebook for any interested individuals is a great place to look, or just send out a mass-text (whatever feels right).

Remember that computers and electronics are some of the more harmful products out there that damage our environment. So give some of these ideas some thought next time you’re upgrading your electronic gadget and think about reducing your carbon footprint and helping to save the planet.

Source: http://intandem.ca/blog/5-ways-to-dispose-of-your-electronics-responsibly

Story source and to find out more information, please visit www.yonderr.com.au

There’s still money to be made out of property if you are careful and hard-headed.

It has been the wealth strategy of a generation. Buy a home. Look after it, improve it, upgrade it. And if cash flow allows, gear up to your eyeballs to buy more property for other people to live in. For the baby boomers and for many from generations X and Y, it has been an easy path to success.

But the prospect of lower rates of capital growth and possibly even falls, if the doomsayers are right and the global economy takes another big turn for the worse, has changed the outlook for property investment.

Home owners and investors will need to be smarter about property. Solid rental yields, buying the right property at the right price and less dependence on gearing will be the key to making money. The days of certain returns made by gearing up and hitching a ride on the market boom are gone. At least for now.

THE OUTLOOK FOR PROPERTY

In November, The Economist magazine said Australian housing prices were still 38 per cent overvalued when compared with incomes and a hefty 53 per cent when compared with rents. Household debt levels in Australia exceeded those in the US at the peak of the boom, which makes us highly vulnerable to falling prices if the worst case of a second crisis – worse than that of 2008-09 – happens.

In December, ratings agency Moody’s said Australian house prices were unsustainable and last month a leading US real estate analyst, Jordan Wirsz, predicted Australian house prices could fall by as much as 60 per cent.

Last week, the Demographia International Housing Affordability Survey found Australia was one of the least affordable countries in which to buy a home. The median house price in capital cities was 6.7 times the median annual household income – with only Hong Kong being more expensive. Sydney was the least affordable city in Australia, with a median house price 9.2 times the average annual household income.

Many commentators say prices might be fully valued, or overvalued, but a crash is not the only way the market can correct itself. The head of property and financial system research at ANZ, Paul Braddick, says talk of a big crash assumes a doomsday scenario for the economy. While not impossible, he says it’s unlikely.

”Our base case is that the labour market will remain soft for the next six months but will start to pick up again in 2012-13,” he says. ”It won’t be a boom in any sense but [the economy] should bottom and start to pick up again.

”But there are risks and that does overlay sentiment. There’s a fear of the unknown and if Europe does implode, how will that affect us? As we saw in 2008 at the height of the global financial crisis, if overseas conditions get worrying enough, the Reserve Bank will react. In 2008-09, it lowered interest rates and boosted the housing market, though that was also helped by the new first-home owner boost and changes to the foreign investment rules, which are less likely to reappear this time.”

Given that, Braddick says the most likely scenario is that house prices will fall further in the next six to 12 months but once they have found a floor, prices should start to rise in line with household incomes. He says that means longer-term growth of about 4 per cent to 5 per cent a year on average, though there will be cycles around that.

The chief economist at AMP Capital Investors, Dr Shane Oliver, says historically, prices get ”stuck in a range” for five to 10 years after they have been pushed to extremes. He says research on house prices since 1920 shows they have risen about 3 per cent a year after inflation in the longer term.

He says in the 1990s, prices were below that long-term trend (see graph below) but they took off in the early 2000s and are now about 25 per cent above the trend line. Though not predicting a US-style collapse, Oliver says it is hard to see prices growing at the rate they were because affordability is so poor and people are more reluctant to take on debt.

Australian Property Monitors (APM) is predicting national growth this year of 3 per cent to 5 per cent (see table above).

It says Brisbane, Perth and Darwin have the potential for higher growth while Melbourne, Adelaide and Hobart are likely to underperform.

POTENTIAL STUMBLING BLOCKS

The managing director of SQM Research, Louis Christopher, says buyers need to ask what would trigger a major selloff in housing and assess the likelihood of those events happening. One strong trigger (thanks to high levels of household debt) would be a return of rising interest rates. ”All it took was the cash rate to get to 4.75 per cent to cause problems in this country,” he says.

He says buyers also need to watch for signs of the banks reducing loan-to-valuation ratios. He says house prices in most big British cities fell by about 20 per cent when British lenders suddenly cut lending ratios from 100 per cent or more to 80 per cent.

”Think about it,” he says. ”If you had a $50,000 deposit and someone was willing to lend 95 per cent, you could borrow up to $950,000. But if they would only lend 80 per cent, you could borrow $200,000 and your maximum purchasing power would be cut from $1 million to $250,000. You can see the havoc that would cause in the market.”

Why would banks cut their loan ratios? Like most things, it comes back to Europe. At worst, if Europe unravelled, we would be likely to see significant bank defaults that would limit the ability of other banks to raise finance outside their own countries. Australian banks have already raised the threat of another credit squeeze.

Other risks include unemployment rising to levels in which forced sales become a problem (Christopher says SQM Research’s modelling suggests problems would occur if unemployment broke through 7 per cent) and banks lifting interest rates independently of the Reserve Bank’s changes.

Oliver says the most vulnerable are heavily geared buyers, because they are most exposed to negative equity and forced sales. RP Data recently found slightly less than 5 per cent of Australian houses were worth less than their purchase price. Queensland had the highest levels of negative equity while Victorian households had the strongest equity positions. In Melbourne, 1.9 per cent of houses were worth less than their purchase price. However, the figures did not take into account debt, especially mortgage redraws.

The research director at RP Data, Tim Lawless, says coastal lifestyle markets are also vulnerable to a downturn and have already suffered from a downturn in tourism and sea-change migrants, as well as weak demand from second-home buyers. He says many of these lifestyle markets experienced dramatic appreciation before the GFC.

He says markets that had a big run-up in prices during the most recent growth periods are now also potentially more exposed to weaker conditions. ”The Melbourne market, for example, has seen home values appreciate by almost 50 per cent since the start of 2007,” he says. ”Rental yields in Melbourne are now the lowest of any capital city and new housing supply has been much more sufficient than [in] other cities.”

WHERE THE OPPORTUNITIES ARE

In this market, most analysts say the old strategies no longer guarantee success.

Buyers will need to do their sums and ensure they are buying well rather than simply picking the next ”hot suburbs” and riding the boom.

Success will also depend on having the flexibility to decide when to sell. That means buyers will need to keep borrowings at a manageable level so they are not forced to sell at the worst possible time.

Christopher says he is loath to tip particular areas, given that any recovery might not be long-lived. But he does favour the outer ring of Sydney, particularly the western and south-western suburbs.

”We see a big movement to more affordable housing,” he says. ”Rents there have already been rising by about 5 per cent a year, infrastructure has been improving and they have the potential to outperform over the next five years. We think 7 per cent growth there is possible.

”More average and above-average income earners are moving west because they don’t want to raise a family in a unit and it makes the mortgage more manageable.”

APM forecasts growth in Sydney this year will come mostly from middle- and lower-band suburbs, supported by high rents and an undersupply of housing. In his 2012 outlook, the senior research analyst at RP Data, Cameron Kusher, also predicted Sydney might perform better than in 2011. ”Home values across Sydney have increased at an average annual rate of just 4 per cent over the past 10 years,” he says. ”Although value growth has been limited, rents have increased by 5.4 per cent for houses and by 6.4 per cent for units in 2011. Estimated sales activity as at September 2011 was 6 per cent above the five-year average. Sydney’s market continues to be hampered by an undersupply of new housing at a time when demand remains strong.

”Although we don’t expect property values to increase at a rate above inflation, we anticipate Sydney will continue to be one of the better-performed markets, especially considering that when adjusted for inflation, values remain below their 2004 peaks.”

A property adviser at Lachlan Partners, Ana Bennett, says areas along the main Sydney transport corridors ”should do well”, given the undersupply of housing – ”areas that aren’t reliant on having two cars to get to work” – though she says Melbourne is a different prospect.

”The large volume of stock coming onto the market in Melbourne is a concern,” she says.

For investment, she favours ”the groovy, funky areas with a younger demographic”, such as South Yarra, Richmond and Middle Park.

”The other opportunity is the old house on the corner block in suburbs like Cheltenham where there is the potential for multi-residences down the track,” she says. ”Investors can rent them out for five years or so with a view to either selling the site or developing themselves. People are saying they’ll build one residence for themselves and sell the second for profit.”

Braddick says buyers should be aware that states are likely to perform differently. ”NSW has the advantage of being the most undersupplied market but it’s tricky to look at particular sectors.” He says if the construction and resources sectors continue to boom, this could support the upper end of the market, while soft conditions in retail and manufacturing could dampen the middle and lower parts of the market.

”But ultimately it will come back to the ‘atmospherics’ – the number of properties on the market, current sentiment and so on,” he says. ”Over the short term there could be significant increases or falls but on average the market is unlikely to achieve much.”

A GREATER FOCUS ON YIELD

To a large extent, buying a home is a lifestyle decision and you can afford to trade off slower capital growth against the desire for a place to call your own.

But if you’re considering putting your hard-earned money to work in investment property, you’ll need to be hard-headed.

Braddick says investors in the 2000s ”got away with non-focused property buying because most prices were going up.” But with capital gains likely to play less of a role, investors will need to focus on yield for more of their return.

”You need to look at the yields now and what they will be in the future,” Bennett says. ”The initial yields in the inner city may be lower but newer stock can balance that with depreciation allowances and if you get income growth, the yield will bounce back.”

Lawless says units have outperformed detached dwellings in terms of value growth in recent years.

”This is probably due to both improving demand related to price sensitivity [units are generally more affordable than houses] as well as the fact that units generally provide higher rental yields than houses. With more focus on urban renewal and higher densities around transport hubs and employment nodes, we would expect that well-located units will continue to be a popular choice for investors,” he says.

”Another tactic that is likely to remain popular among investors is buying within close proximity to the capital cities. The 10-kilometre to 15-kilometre ring should continue to provide reasonable housing demand with tight supply constraints. Public and private transport options are becoming even more important and these factors will be one of the primary drivers of long-term capital gain.”

Oliver says investors might also want to consider looking outside the residential box.

”You can argue that if you’re going to buy investment property, you’d be better off looking at commercial property where the yields are higher and there is less evidence of overvaluation,” he says. ”Listed property trusts have gone back to their roots after going through a more speculative period and are offering yields of 5.5 per cent to 6 per cent, unlisted property trusts and syndicates are an option [though you have to be careful], or you can invest directly in something like a shop, warehouse or strata office.”

The new rules to property success

When it comes to gearing, less is more. ”It’s not what you own but what you owe,” Shane Oliver, of AMP Capital Investors, says.

Think affordability. The more expensive your property, the smaller the list of potential buyers or renters.

Buy well. What’s the point of being in a weak market if you don’t get to dictate terms? ”You make money in property when you buy, not when you sell,” Ana Bennett, of Lachlan Partners, says.

Don’t count on making a quick buck. ”If you think you’re getting a bargain, you’re usually not,” Bennett says. She says property should be regarded as a long-term investment. ”Particularly for investors, you have to ask whether you can really afford it,” she says. ”There’s no point struggling and realising you have to sell in two to three years.”

If you’re investing, think income. In the absence of strong capital growth, investment returns will increasingly depend on a decent, and growing, rental yield.

Do your homework. While average returns might not look promising, the property market is highly segmented and demand for the right properties will remain strong. Look for properties that are in undersupply, not a dime a dozen. ”I would be wary of locations that have recently experienced a large surge in home values or where rental yields are lower than average,” RP Data’s Tim Lawless says. ”Areas where housing can easily become oversupplied should also be treated with some caution.”

Understand that property prices can be volatile – especially in the short term. Just because your house price isn’t quoted on the news each night doesn’t mean it can’t go up and down. ”If you put a large proportion of your money into a particular investment, it is a risky position, particularly if you’re also leveraged,” Michael Sherris, from the Australian School of Business, says. ”There may be half the volatility that you get with shares but people think there’s no volatility at all.”

Look for areas with strong population growth, strong demand and good infrastructure that is improving.

Think outside the box. Will it be possible to add value to the property in the future? If residential property doesn’t stack up, what about commercial?

Don’t expect history to repeat itself.

Story by Annette Sampson, source: www.domain.com.au

From the Boardroom – 2012 Summer Edition

To read the full story, please click on the link!

The Board of the Reserve Bank meets on February 7 next week. In July last year Westpac forecast that the next easing cycle would

total 100bps beginning near year’s end. Subsequently, the Board decided to ease the overnight cash rate by 25bps in both November and December. Based on current information, we continue to expect a further 50bps of easings in this cycle with the next move at the February 7 meeting and another to follow in May.

The case supporting a rate cut next week is strong. Market pricing is certainly arguing for a move: current pricing puts an 85% probability on a 25bp cut.

Clearly, a key factor used by the Board to justify the decision to cut rates in December hinged around Europe and funding conditions.

The RBA Governor on December 6 noted, "Financial markets have experienced considerable turbulence and financing conditions have become much more difficult".

It is reasonable to argue that financial market conditions have improved since the December meeting. In the Board minutes it was noted, "Australian banks had found long–term debt markets dislocated" and "wholesale debt markets appeared to be closed to many financial institutions".

Bill Evans, Chief Economist

Westpac Bank

A Newspoll survey conducted late last year showed many Australians plan to keep rising energy prices in check by closing curtains, washing clothes in cold water and taking shorter showers – but how much does any of that actually affect the average power bill? Apparently, quite a bit.

By matching the five most popular energy-saving strategies with some ballpark dollar savings based on the National Australian-Built Environment Rating System (NABERS), it was found the average three-person household can save hundreds of dollars a year.

Put simply – simple changes can lead to big savings on your power bill.

Of course, all of this varies depending on which state you live in, how you use power, and exactly how you implement each strategy in your home. But whichever way you look at it, there are plenty of opportunities to reduce your utility bill with just a few behavioural changes.

1. Closing curtains/blinds: $55 p.a.

Windows are a home’s biggest sources of heat in summer (and cold in winter) so the 89 per cent of Newspoll respondents who plan to close blinds and curtains can expect to save around $55 this year according to the NSW Government’s Save Power website.

Effective window insulation includes:

- Shading windows and skylights during the day as much as possible

- Lined curtains and close-fitting Holland and/or Roman blinds instead of vertical blinds, conventional or timber Venetians

- External blinds or awnings on north, east and west windows

- Keeping doors and windows closed during the day as much as possible

- When the temperature drops at night, opening doors and windows up.

With window glazing, you can save even more. If the cost of double-glazing looks a bit steep, consider secondary glazing (fitting a membrane to the window) instead.

Of course, it helps if you’ve got effective house insulation. Energy retailer AGL estimates efficient insulation can bring the temperature down by up to 7 degrees in summer, and increase it by 10 degrees in winter, slicing more than $100 off your power bill every year.

2. Washing clothes in cold water, drying on line/rack: $380 p.a.

AGL says that cold water has been ‘scientifically proven’ to be just as effective as hot water when it comes to washing clothes, and Save Power calculates the cost saving at $30 or more per year.

You can save another $30 per year if your machine is a front-loader with a 5-star energy rating.

But the real savings kick in when you cut back on clothes dryers. These energy thieves can use more power over the course of a year than a reasonably energy-efficient fridge, and cutting them out can save a whopping $350. Dry outside or on a rack instead – apart from being budget-friendly, it’s a whole lot kinder to your clothes too.

If you do need to use the dryer, AGL recommends setting it to warm rather than hot – it takes a little longer but uses less energy.

Bear in mind the cold water rule doesn’t apply to dishwashers – hot water is more efficient when it comes to dishes.

3. Being quick in and out of the fridge: $25 p.a.

Running your fridge efficiently can save about $25 per year. That means making sure it’s set to the right temperature (fridge at 4°C, freezer at -18°C), has decent sealing and is kept closed as much as possible.

Fridges use more power when they’re empty than when they’re full so if you’ve got a second fridge, turn it off and leave the door ajar when you don’t need it. Giving it a rest for six months of the year could take another $130 off your bill.

And if it’s time to upgrade, you’ll find an energy-efficient model pays itself off before long by reducing power bills by about $145 per year.

4. Taking shorter showers: $105 p.a.

Shaving three minutes off shower times can save a three-person household about $105 a year – or much more if your house is still running an electric water heater.

“Electric water heaters account for around 25 per cent of a household’s energy use,” says Stephen Cranch from Solahart, an Australian solar water heater manufacturer.

“Switching to a solar water heater will reduce water heating energy consumption by 50-90 per cent,” he says – he says, and according to Save Power, reduce your annual power bill by about $150.

Plus, the Federal Government is planning to phase out electric water heaters from 2012, so rebates are also available for households needing to upgrade.

5. Switching appliances off at the power socket: $125 p.a.

It’s estimated that standby power contributes about 10 per cent of every power bill, so switching things off at the wall can save $125 or more a year.

And it’s not just computers and appliances. Even chargers use power when they’re not connected to our phones, iPads, razors and toothbrushes, and the digital clock on our microwaves can cost more to run than the cooking function itself.

But awareness goes a long way. All up, you can reduce your bills by close to $700 without sacrificing comfort or refitting your home.

Source: www.smh.com.au, www.yonderr.com.au

Apartments and multi-storey homes are about to get a little safer for children thanks to a rule change around windows in new buildings.

The Australian Building Codes Board has ruled that all windows in new homes and apartments that are more than two metres off the ground must be either fitted with window locks that stop the window being opened more than 125mm (12.5 cm), or must have reinforced screens to prevent children from falling from a height.

The changes will be included in the National Construction Code from May 2013.

The Australian Building Codes Board estimates that owners and builders will choose to fit 80 per cent of windows with locks, and the remaining 20 with reinforced screens. Its research priced window locks from $20 – $70 each, and strong screens from $130 a square metre, putting the average cost of a suitable screen at $130.

Ron De Vere, a project manager with the Australian Building Codes Board, says the decision was made after wide consultation with industry, and with fire authorities across the nation.

De Vere said an economic analysis that took into account the cost of installing locks and screens versus society’s cost of treating children who had fallen from windows showed that the broader cost-benefit of the changes was around zero.

However, "the board was swayed by the risk to children and the danger of children falling out of buildings", he says. "It’s a bit like the pool safety issue, the child drowning … the value of a child’s life is so crucial."

Danny Cass, a professor of paediatric surgery at the Children’s Hospital Westmead, has welcomed the changes saying the recognition that children could access windows and easily climb or fall out of them was a win for commonsense.

"Before, they thought a kid couldn’t climb that high but … they often pull things up to it, or beds are placed next to it," Cass says.

Just a like a pool safety fence though, children will only be protected when adults remember to lock the windows and check that the reinforced screens are in good order.

The board backed away from an initial proposal to mandate window guards for windows two stories or above in all domestic dwellings.

It also a decided against that a proposal to increase to one metre the minimum floor-to-sill height of openable windows in rooms that are four metres from the ground outside.

The minimum floor-to-sill height will effectively remain at 865mm as the current provisions require a barrier of 865mm be in place to any openable window that is more than four metres from the ground, and it is common practice to place the bottom of the window at that height, using the wall itself to create the barrier.

The floor-to-sill height requirement will remain even where a lockable or removable device or screen is in use – in case the device or screen is inadvertently unlocked or removed. However, the minimum height from ground level at which the window-to-sill or barrier rule comes into play will drop from four metres to two metres after evidence showed serious injury can happen when a child falls from just two metres.

The changes will come into effect from May 2013, a timeframe the board says will allow industry to prepare for the changes.

An average of one child a week is taken to hospital in Australia after falling from a window. According to figures from the Children’s Hospital Westmead, 80 per cent of children who have fallen from a window have significant injuries, and four out of five children who fall from windows are aged under five. For information on keeping your kids safe near windows, click here.

Cass says the next challenge is making windows in existing housing and apartment stock safer for children. Cass is part of a working party on child falls at the Children’s Hospital Westmead. The group will meet again this month to explore further recommendations for existing properties.

Story by Carolyn Boyd, source: www.domain.com.au

The preliminary capital city dwelling value index result for December was -0.2% (s.a.) following an upwardly revised +0.4% rise in dwelling values in November (was +0.1%). Revised regional house values for November increased from +0.3% to +0.5%. Sydney housing has been the nation’s best performer with dwelling values up 0.4% in December and by 0.7% over the quarter (s.a.).

In the generally seasonally weak month of December, the preliminary RP Data-Rismark Home Value Index result for capital city dwelling values was -0.2 per cent (s.a.). Low sales volumes in December mean that this number will likely see a more significant revision than normal.

The November result from the RP Data-Rismark index for dwellings in capital cities has revised up from +0.1 per cent (s.a.) to +0.4 per cent (s.a.) based on additional sales information. This marks the largest month-on-month improvement in Australian home values since May 2010.

The RP Data-Rismark ‘rest-of-state’ index, which covers Australia’s regional markets, has also revised up in November from +0.3 per cent to +0.5 per cent (s.a.). This is the most significant increase in regional house values since November 2010.

Over the December quarter, Australia’s capital city home values declined by -0.5 per cent (s.a.).

RP Data’s director of research Tim Lawless, said, “The December quarter was the year’s smallest quarterly decline. According to our index, capital city home values fell by -1.5 per cent (s.a.) in the March quarter, and by a further -0.8 per cent (s.a.) in each of the June and September quarters. This rate of decline had decelerated to -0.5% by the final quarter of 2011.”

In 2011, Australian capital city dwelling values experienced a capital loss of about three and a half per cent. Regional house values fared a little better, correcting by around three per cent. This compared to the 14-15 per cent decline in Australian shares. Adding in rents, the gross total return to Australian property investors was slightly less than one per cent over 2011.

Rismark’s managing director Ben Skilbeck said, “The month of December is characterised by a significant lull in activity and the preliminary index results have likely been influenced by some more volatile Melbourne and Perth estimates. We expect to get better clarity on the monthly movements as more information is reported.”

“Sydney currently has the largest volume of reported sales in December. In seasonally-adjusted terms, Sydney dwelling values rose by 0.4 per cent in the month of December. In the December quarter, Sydney dwelling values are up a total of 0.7 per cent (s.a.)” Mr Skilbeck said.

RP Data’s Tim Lawless observed that rental markets continued to strengthen in December.

“Weekly rents across the capital cities were up 1.0 per cent over the December quarter and are now 6.3 per cent higher than at the same time last year.”

“These higher rental rates combined with the slide in property values have improved investors’ yields. The average capital city dwelling is now offering a gross rental return of 4.6 per cent after a consistent trend upwards since mid-2010 when the typical capital city dwelling was yielding just 4.1 per cent. Darwin and Canberra are the highest yielding locations for property investors while Hobart, Brisbane, and Sydney provide gross yields that are better than average,” Mr Lawless said.

On the outlook for the year ahead, Rismark’s Ben Skilbeck commented, “We expect that the RBA’s interest rate cuts in the final two months of 2011 will lend further momentum to housing activity as transaction volumes pick up over February and March after the seasonally slow months of December and January. If financial market pricing for substantial additional RBA rate cuts proves accurate, we could see a stronger-than-expected bounce-back in housing conditions.”

“Housing affordability in Australia has experienced a striking improvement in recent times. While disposable household incomes on a per household basis rose by five per cent over the year to September 2011, Australian dwelling values have declined by 3.4 per cent since September 2010. As a result of the RBA’s rate cuts borrowers can now get fixed- and variable-rate home loans as low as 5.9 per cent and 6.14 per cent. Rismark’s research shows that disposable incomes per household have risen about 15 per cent further than Australian dwelling values since the end of 2003. This helps account for the decline in Rismark’s national dwelling price-to-income ratio, which is as low as its been since 2003” Mr Skilbeck said.

RP Data’s Tim Lawless added, “While global uncertainty and a stagnant local labour market could weigh on the consumer’s mindset, we are nevertheless observing improvements in monthly housing finance commitments. RP Data’s leading indicators on average selling times and vendor discounts are also starting to look healthier. There is no doubt that additional interest rate relief in 2012 would afford a very welcome cushion to the housing market.”

As we head into 2012 pondering where the housing market is headed – will it be down 10 per cent as some commentators are expecting, or will others be on the money with predictions of 5-7 per cent growth – there is some interesting news emerging about home loans.

Out today are figures showing mortgage holders are increasingly being lured by fixed rates.

Despite predictions about one, two or even three rate cuts coming over the next six months, a growing number of homeowners are locking in their rates now. Data from the Australian Bureau of Statistics shows fixed loans grew from 10.6 per cent of new housing loans before the most recent rate cut in November to 11.1 per cent.

And mortgage broker AFG reveals that 19.2 per cent of loans arranged through its business in December were issued at fixed rates, a big jump from 8.2 per cent six months earlier.

An odd move you may think given all the predictions are for official rates to fall further this year. But CommSec economist Savanth Sebastian argues people are simply getting in at what they can afford.

“It’s more about ensuring you can purchase a place within your budget and within your limits," he says. "While the risks are to the downside [for rates to fall], I think the fixed rate market has already priced in a couple more rate cuts,” he says.

In addition “even though the Reserve Bank will cut rates, the banks need to pass it on. So the fixed market is looking very attractive, not only do you need a couple more rate cuts [for variable rates to match fixed] but you need it all to be passed on as well to justify where the fixed market is.”

Many homebuyers may also be wary that should there be a swift change in the economy, rates can easily shoot back up. 

“We saw straight after the GFC how rates rose, it certainly would have caught some home buyers that were on the edge in terms of repayments, so at least this way they can sleep easy,” says Sebastian.

Further news on the home loan front could point to a slightly more positive year for property than last, where we saw prices fall across the board. Australian Bureau of Statistics figures have revealed that the number of new owner-occupier housing loans rose by 1.4 per cent in November while the value of loans rose by 2.2 per cent.

However, home loans aren’t being drawn down – rather potential buyers are simply getting their finance sorted and sitting back and waiting until the right time to buy.

So while for the past eight months there’s been consecutive jumps in the number of home loans being approved, in November the value of loans that had actually been drawn down was two per cent lower than a year ago, and commitments not advanced were almost 11 per cent higher than the previous year.

With all the concern about the state of the US and European economies, it’s little wonder buyers have been taking a cautious approach.

So just what will entice all these cashed-up potential home buyers to jump? Could a February rate cut be enough?

CommSec’s Sebastian thinks so. “Even the thought of rate cuts should prompt activity levels to increase over the next few months,” he says.

Story source: www.domain.com.au

New home sales jumped in November in response to the Reserve Bank’s interest rate cut.

The sales of new homes rose 6.8 per cent in November, following a downwardly revised increase of 2.8 per cent in October, according to the Housing Industry Association – Jeld Wen new home sales report.

While detached house sales surged 9.8 per cent, apartment sales slumped 17 per cent, HIA said today.

“Interest rate cuts, both those we’ve had and those that are still warranted, provide a … catalyst for a sustained and strong recovery in new home building conditions,” said HIA chief economist Harley Dale.

The Reserve Bank in November lowered the interest rate to 4.5 per cent from 4.75 per cent, in response to increased concerns about the European sovereign debt crisis slowing the global economy and hurting Australia’s growth.

It was the first reduction since April 2009. In December the RBA cut the key rate by another 25 basis points.

Capital city home values also posted their first monthly rise in 2011 in November, edging up 0.1 per cent seasonally adjusted, according to RPData.com.

For the year to November, however, capital city home prices fell 3.5 per cent.

"This is a healthier but not unexpected result," Dr Dale said.

"With falling interest rates, a competitive building market, and a greater availability of skilled trades amidst still very soft overall demand conditions, now is clearly a good time to build a new home for those who are financially set to take that decision.

“There is, however, a long way to go to restore new home sales volumes to acceptable levels," he said. "At present sales volumes are running at least 20 per cent below what you could conservatively call
healthy."

Sales soar in NSW

The volume of detached house sales soared 22.8 per cent in New South Wales and 11.6 per cent in Victoria. They also rose 5.7 per cent in Western Australia and 4.7 per cent in Queensland. In South Australia they fell 11.3 per cent.

Mr Dale said a full recovery in housing activity wouldn’t emerge unless the government offered well-targeted stimulus and began to reform housing planning policy to cut the barriers to new housing supply.

Measures of growth in the construction sector show that it remains under pressure, as households borrow less and real estate prices keep housing out of reach for would-be buyers.

The Australian performance of construction index for December, released today, remained under the 50 point level separating expansion from contraction for the 19th straight month even as the index rose by 1.4 points to 41 in December, helped by the resources-related construction.

Australian Industry Group director of public policy Peter Burn said the two-speed economy was visible in construction data, with "a clear divide between the expanding engineering construction sub-sector and the still-contracting commercial and residential construction sub-sectors".

House building fell 5.7 points in December to minus-32.9.

"The increased pace of contraction in the house building sub-sector in December remains deeply concerning,"  Mr Burn said.

Story by Chris Zappone www.domain.com.au

We’ve been so worried about plastic shopping bags, but what about the plastic we use to wrap our lunches?

As a Mum there are some things I am not imaginative enough to work out. What do you suggest as substitutes for freezer wrap to put meat or cakes etc in, and for lunch?

Like their shopping bag counterparts, plastic products such as freezer bags and cling film are not environment-friendly.

While technically it’s possible to recycle plastic bags, the reality is not simple.

Linda Edwards from the National Packaging Covenant explains: “No Australian plastic is biodegradable. Traditionally in Australia it’s been very difficult to recycle because of the sorting and collection system needed. Also there is a lack of plants able to reprocess it.”

Fortunately, there are alternative, environment-friendly options.

Substitutes such as 4MyEarth Wraps (www.4myearth.com.au) are a good choice for keeping sandwiches fresh. These reusable wraps are machine washable, and they not only wrap sandwiches but also act as a placemat to eat them off! The wraps come in sandwich and snack sizes.

A sandwich-sized hard plastic container would also do the trick.

When storing food in your fridge or freezer, consider investing in plastic containers rather than plastic bags – containers are endlessly reusable so you don’t need to discard the plastic every time you take something out of the freezer.

Multiple use freezer bags can be found in your local supermarket, although these have to be thrown out eventually.

Look out for biodegradable freezer bags that have recently come onto the market. They’re made of cornstarch, a renewable resource.

But if you can’t give up the cling wrap, remember that you probably don’t need to use very much – it only needs to cover the food, not mummy-wrap it!

Story source: www.yonderr.com.au

AUSTRALIAN housing markets displayed a generally resilient performance in 2011, reflecting the inherent security of residential real estate in this country, particularly when compared with housing markets in similar open-market economies.

The year was always set to be a period of correction for Australia’s housing markets following the unsustainable growth in house prices recorded through 2009 and 2010.

Between January 2009 and June 2010, Melbourne’s quarterly median house price rose by nearly 30 per cent, with Sydney’s up by almost 20 per cent over the same period. All other capitals also recorded big rises in house prices over those 18 months.

Housing affordability crashed by the end of 2010, with surging house prices and rising interest rates combining to send buyers into hibernation.

Australian Property Monitors data has revealed that capital city housing markets have generally performed encouragingly in 2011 despite the pressure on housing affordability generated in 2010 and a mixed economic performance in 2011.

The national median price for houses over the year to October 2011 fell by just 1 per cent compared with the previous year, with median unit prices rising by 1.2 per cent over the year. The 2011 result follows a 17 per cent rise in the national median house price over the year to October 2010 and a 12.2 per cent rise in the median unit price over the same period.

The best capital city performers were Melbourne and Sydney, where annual median house prices rose by 1 per cent. Darwin and Adelaide house prices were flat and Hobart down 1.5 per cent.

The worst performers over the year were Brisbane and Perth, where annual median house prices fell by 3.5 and 4.75 per cent respectively.

The unit market clearly outperformed the housing market over the year to October 2011, with Sydney recording median unit price growth of 2 per cent followed by Melbourne and Darwin up by 1 per cent. Brisbane and Perth were again the underperformers, with annual unit prices falling by 1.3 per cent and 3.5 per cent respectively.

Bureau of Statistics data confirms the solid performance by Australian housing markets in 2011, with the number of owner-occupier housing loans rising by 2.4 per cent over the 10 months ending October compared with the same period in 2010.

New South Wales was the best performer with an increase of 8 per cent, with Western Australia surprisingly in second place with growth in home loans of 7 per cent over the year, courtesy of a surge in the past three months – indicating perhaps growing late-year momentum in that market.

By contrast, the number of home loans approved in Queensland in the year to October fell by 8.4 per cent compared with the same period in 2010.

The nature and strength of Australian housing markets in 2011 was always to be determined by the underlying supply and demand characteristics of individual markets and the strength of national and local economies.

In addition to the affordability barriers created by the prices surge and interest rate rises of 2009 and 2010, housing markets have had to encounter unexpected headwinds in 2011. The impact of the central Queensland and Brisbane floods was not restricted to the local housing markets. National economic output was affected through reduced coal exports and the cost of the reconstruction levy. Higher prices for fruit and vegetables also affected household budgets nationally.

The impact of catastrophic natural disasters on the national psyche and confidence cannot be underestimated, particularly given Australia’s recent propensity for financial conservatism, especially when it comes to buying or borrowing.

The Japanese earthquake and associated tsunami in March also contributed to lower economic growth and reduced consumer confidence.

Stalling economic growth in 2011 was also a product of continued mixed performances by various industry sectors, particularly retail, manufacturing, tourism and construction. As a consequence, all capitals recorded rises in unemployment through mid-year. All these factors combined to subdue consumer capacity and confidence and consequently dampen home buying activity through 2011.

Most Australian capital city housing markets are, however, set to record growth in median prices over 2012 as the national economy gathers strength. The Australian economy is primed to expand strongly on the back of a significant resources boom with the Organisation for Economic Cooperation and Development predicting gross domestic product will increase by 4 per cent over the year.

Melbourne, Adelaide and Hobart will be the underperformers in 2012, with median house price growth of between zero and 5 per cent.

Melbourne’s balanced housing supply and demand mix offers buyers a wide choice and it remains the most tenant-friendly capital city rental market. Affordability barriers, however, remain for home buyers.

With the Victorian economy showing signs of running out of puff, particularly as the recent construction boom abates, the housing market is set to drift sideways though 2012. The possibility remains of some growth in median house prices by the end of 2012 as the impact of a strong national economy filters through.

Dr Andrew Wilson is senior economist for Australian Property Monitors.

Source: BusinessDay

www.news.domain.com.au

If you’re a parent, you likely have several giant bins filled to the brim with toys for your little ones. And with Christmas (ho ho ho!) over you’re likely to have gotten toys in all shapes and sizes.  And while I’m no bah humbug, the relative size of our children’s toy boxes has become incredibly large given their small stature, and the environmental problems are equally ill-proportioned:

• Mountains of trash: Of the 40 million toys thrown away annually, 13 million are put into the rubbish according to green living website www.ecolife.com.
• Difficult recycling: Because toys are made from many different materials – plastics, metal, glass, computer components, and more – they are incredibly difficult to recycle and in many cases are not accepted by recycling facilities.

Once Christmas is over, we try to keep the toys under control (as well as our carbon footprint) by having a post-Christmas clean-up and getting rid of toys that haven’t been used or the children have simply grown out of.

Donating used toys to a good cause can be one of the most effective ways to recycle toys. Not only does this prevent garbage from being sent to landfills, it provides a second life for your used toys, which means the materials will go on functioning for many months or years to come. The sky’s the limit when it comes to donating used toys – use your imagination to find a person or charity who could use your second hand toys:

• Children’s charities
• Children’s hospitals
• Churches
• Day cares
• Family members
• Friends
• Neighbours
• Playgroups
• Thrift shops like those through St Vincent de Paul or the Salvation Army

Not all toys can be donated to charities for various health and ethical reasons. To ensure that your toys have the best chance of being given away rather than trashed, consider these toy donation guidelines:

• Toys should be nontoxic
• Ensure that the toys are clean and are not missing parts
• Broken toys are unlikely to be accepted, especially if they pose a choking hazard
• Avoid toys with a religious theme unless you’re donating to a faith-based charity
• Toys that require batteries are not as suitable for donation as they will require the parents of the child to purchase batteries (which may be out of their budget)
• Toys made from things like fabric, cardboard, paper, and other absorbable materials are often rejected as they are difficult to clean and disinfect

In addition to donating used toys, there are many ways you can recycle toys so that they don’t end up in the landfill:

• Contribute to a toy library: Some communities have toy libraries that are like book libraries – you can check toys in and out so that your child is never bored with their personal stash. Each toy library is unique to the local community, so the best way to find one in your area is to do a search online for your city/town name + “toy library.”
• Sell or trade: Sometimes a toy is too valuable to simply give away, in which case you could try to sell it.
• Recycling centers: Some communities have set up recycling programs for large plastic toys and metals toys as well, though you will need to call ahead to determine your recycling centre’s toy recycling policy.
• Deconstruction: If your recycling centre will not take your toys as is, sometimes you can dismantle them yourself to recycle the various components, such as the paper, cardboard, metal, and plastic which can then be put with other recyclables of the same kind. Cardboard and paper components can also be composted.

If you have any good ideas for what can be done with second hand toys we’d love to hear from you.

Source:  www.ecolife.com

Read more on how to be green at www.yonderr.com.au

Ongoing discount loans lose momentum

Borrowers’ preference for fixed rate home loans is continuing at an unrelenting pace regardless of recent cash rate cuts, national loan approval data from Mortgage Choice has revealed.

Fixed rate loans accounted for 24% of all new home loan approvals during December 2011, up from 21% in November and well above the 12-month average of 15%. Demand for this loan type has risen for seven consecutive months, increasing 13 percentage points since May 2011.

Company spokesperson Belinda Williamson said, “Consecutive cash rate cuts in November and December 2011 have not swayed Australian borrowers’ desire for fixed rate loans.”

“It is possible borrowers’ need for certainty around their home loan repayments, coupled with the affordability of fixed rate loans are the driving forces behind demand for this loan type.

“During December fixed rates were significantly lower than variable rates, in some cases the difference was one percentage point or more.

“Our loan data shows fixed rates are now more in demand than they have been in over three and a half years at the expense of variable rates, which have lost popularity among new borrowers.

“Customer demand for variable rate loans fell from 79% to 76%, well down on the 12-month average of 85%. The most popular variable rate home loan with new borrowers, ongoing discount rate loans, slipped from 44% to 41%, also well below the 12-month average of 35%.”

Basic variable loan demand rose marginally to 15% of all approvals in December, up from 14% in November while standard variable loan demand fell slightly to 16% from 17%. Interest in line of credit loans dropped to 3% from 4% and the uptake of introductory rate loans was steady at 1%.

For more information visit: www.mortgagechoice.com.au

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