One of the primary drivers of property prices and to some extent rental returns is where people choose to live and therefore where future population growth is likely.   Growth is what supplies demand and demand is what drives prices and rental incomes upwards.

Now the vast majority of people, over 64% of the total population, live within the capital cities.   Staggeringly, this means that over two thirds of our population live in just 0.5% of our overall land mass.   Going back a century or so more people lived on the land but with the industrial revolution, the jobs and therefore the people moved to the big cities.   The resources boom is drawing some people back to some regional areas but the fact is the vast majority of the jobs still remain within the capital cities.

With good employment prospects and diverse major infrastructure such as schools, hospitals, transport, shopping, recreation and other amenities concentrated in the capital cities, it is here that will see the vast majority of the population choosing to reside.

However, having said that there are some regional centres that have shown great capital growth in recent years but a deeper investigation shows that their growth is tied to one or two major industries so their continued growth is very reliant on the future performance of those industries.    Just look at the once booming Gold Coast and Sunshine Coast.   Areas that were heavily reliant on the tourism market and due to the downturn in tourism these areas have taken some real hard hits which will take many years to recover, if at all.

Of course all property markets are cyclical and will have their highs and lows, but property should always be viewed as a long term investment.   Over the long term property in capital cities has shown above average capital growth and with the current shortage of housing stock and good levels of population growth I see every reason for that trend to continue.

Carbon Tax – Are We Being Conned?

Let’s put this into a bit of perspective for laymen!

ETS is another tax. It is equal to putting up the GST to 12.5% which would
be unacceptable and produce an outcry.

Read the following analogy and you will realize the insignificance of carbon
dioxide as a weather controller or contributor to ‘global warming’.

Pass on to all in your address book including politicians and maybe they
will listen to their constituents, rather than vested interests which stand
to gain by the ETS.

Here’s a practical way to understand the PM’s Carbon Pollution Reduction
Scheme.

Imagine 1 kilometer of atmosphere and we want to get rid of the carbon
pollution in it created by human activity. Let’s go for a walk along it.

The first 770 meters are Nitrogen.

The next 210 meters are Oxygen.

That’s 980 meters of the 1 kilometer. 20 meters to go.

The next 10 meters are water vapor. 10 meters left.

9 meters are argon. Just 1 more meter.

A few gases make up the first bit of that last meter.

The last 38 centimeters of the kilometer – that’s carbon dioxide. A bit
over one foot.

97% of that is produced by Mother Nature. It’s natural.

Out of our journey of one kilometer, there are just 12 millimeters left.
Just over a centimeter – about half an inch.

That’s the amount of carbon dioxide that global human activity puts into the
atmosphere.

And of those 12 millimeters Australia puts in .18 of a millimeter.

Less than the thickness of a hair. Out of a kilometer!

As a hair is to a kilometer – so is Australia’s contribution to what the
PM calls Carbon Pollution.

Imagine Brisbane’s new Gateway Bridge , ready to be opened by the PM.
It’s been polished, painted and scrubbed by an army of workers till its 1
kilometer length is surgically clean. Except that the PM says we have a
huge problem, the bridge is polluted – there’s a human hair on the roadway.
We’d laugh ourselves silly.

There are plenty of real pollution problems to worry about.

It’s hard to imagine that Australia’s contribution to carbon dioxide in the
world’s atmosphere is one of the more pressing ones. And I can’t believe
that a new tax on everything is the only way to blow that pesky hair away.
—————————————————————————————————

Maybe you should pass this on while the ETS is being debated in Federal Parliament..

Commitments for private sector houses fell by 4.3% to 25,761 during the quarter, but were up by 2.7% over the year, while commitments for other residential building fell by 13.5% during the quarter, but rose by 39.3% over the year.

The RBA Governor, Glenn Stevens released the following statement today after the RBA Board Meeting:At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.

Since the previous Board meeting, concerns about the creditworthiness of a number of European governments have again become the main focus of financial markets, with a marked rise in sovereign bond spreads for some euro-area countries and an increase in volatility. At the same time, recent data suggest that the Chinese and Indian economies have continued to grow strongly and price pressures, particularly for food, have picked up in China as well as a number of other economies in Asia. Modest growth is continuing in the United States.

For Australia, the terms of trade are at their highest level since the early 1950s, and national income is growing strongly as a result. Recent information indicates that, as had been expected, private investment is beginning to pick up in response to high levels of commodity prices. In the household sector thus far, there continues to be a degree of caution in spending and borrowing, which has led to a noticeable increase in the saving rate. Asset values have generally been little changed over recent months and overall credit growth remains quite subdued, notwithstanding evidence of some greater willingness to lend.

Employment growth has been very strong over the past year, though some leading indicators suggest a more moderate pace of expansion in the period ahead. After the significant decline last year, growth in wages has picked up somewhat, as had been expected. Some further increase is likely over the coming year.

The exchange rate has risen significantly this year, reflecting the high level of commodity prices and the respective outlooks for monetary policy in Australia and the major countries. This will assist, at the margin, in containing pressure on inflation over the period ahead. Over the next few quarters, inflation is expected to be little changed, though it is likely to increase somewhat over the medium term if the economy grows as expected.

Following the Board’s decision last month to lift the cash rate, and the subsequent increases by financial institutions, lending rates in the economy are now a little above average. The Board views this setting of monetary policy as appropriate for the economic outlook.

Without doubt, it caught almost everyone by surprise as data released in the days prior led most economists to predict that rates would remain on hold.   Adding further negative sentiment to the rate increase was the CBA’s decision to increase rates by an additional 0.20% with the other major banks certain to add an additional premium to their own increases.

For the average Australian mortgage holder this is yet another piece of bad news and will cause further strain on already tightening household budgets.   However, in their summary the RBA tended to indicate that this increase was a pre-emptive move and that further increases are not likely in the near term.

Affordability will become a further issue for prospective home purchasers as the rate increase will mean decreased borrowing power.   However, countering that is what appears to be a significant stagnation of house prices in most parts of the country along with an increasing number of properties listed on the market and much longer selling periods.

However, whilst the rate increases are largely bad news for owner occupiers, the current glut of properties on the market, along with continuing historically low rental vacancy rates, there is a great opportunity for investors to swoop in and pick up well priced properties.

Increasing interest rates have less of an impact for investors due to the tax benefits available which help ease the burden of the extra mortgage repayments.   At the same time, rents have increased solidly over the last year or so and are predicted to keep steadily increasing, thereby increasing the yield on rental properties closer to and possibly beyond the long term average of 5% per annum.

For owner occupiers there needs to be an increased emphasis on sound household budgeting and taking active steps to reducing non mortgage debt such as credit cards and personal loans, which attract a much higher rate of interest, as quickly as possible to free up extra cash for the budget.   Consequently if you do have non mortgage debt, your best strategy is to reduce the home loan repayment to the minimum amount required and focus that extra cash on the non mortgage, higher interest debt and pay it off as soon as possible.

Oh yes, aren’t the solar panels doing a great a job. In Canberra last week it was revealed that they would add $225 to the average electricity bill, and that the Government’s proposed carbon tax would raise them by a further 24%.
It is just that the poverty creep is making its way up the social strata, though I doubt it will reach the most affluent group The Greens. Bitterness on my part I suppose but I represent a party that represents the poorest electorates. Now what other lunacy are we considering, none other than shutting down the Murray Darling Basin so you can have a diet that suits the misery of the winter nights temperature in the unheated house..
Yes we have become so oblivious to the obvious because the loudest voices are not necessarily the neediest. We spend, sorry borrow, for school halls that do not make students more competitive in competency. No school hall taught a student a second language or a higher level maths. We borrowed for ceiling insulation and burnt down 190 houses and 4 installers died.
We borrowed for aimless $900 cheques as we decided that somehow imported electrical goods to Australia would reboot the US economy. We borrowed so much that we are now 170 billion dollars in gross debt. We are told not to worry about gross debt, its net debt that counts. Well try that out on your local bank manager. Try paying him back what you think you owe him, because of what you think others may owe you. Not surprisingly he will direct you to what is noted on your loan statement.
It is funny how the people who try to assuage our concerns with the net debt myth can never clearly identify what are the items that make up the difference between the figure on the Office of Financial Management website as Australian Government Securities outstanding and their miraculous net debt figure.
Since the election, the Labor-Green government has borrowed an average $1.6 billion each week. Every fortnight that amounts to three new major public hospitals or the inland rail from Melbourne to Brisbane. Not bad going for a country that can not keep its pensioners warm.
Whilst we are waiting we are merrily selling at a record rate our agricultural land, mines and now the hub of commerce the ASX, so that when the day of reckoning for or children comes they can try and get out of trouble by working fastidiously for someone else and hoping they feed them. The average foreign purchase of agricultural land over the past two years is 2.7 billion a year or more than 10 times that of the average of the previous 10 years.
So when is all this going to change? When are we going to shake ourselves out of this dystopia that we are inflicting on others less connected but more affected by the self indulgent political delusion. What is our current solution to the very real problems becoming more and more apparent at the bottom end of the lucky country?
Well apparently it is gay marriage. Yep I am sure that will warm the cockles of their hearts, if not their living rooms, that our nation’s wisest are going to engage in hours, possibly days at the end of the political year on gay marriage. Then when we are finished with gay marriage we may have enough time to engage the remainder of our time on euthanasia.
You can not reduce power prices without increasing the supply of cheap power. No other nation has an earnest desire to feed you before they satisfy their own. It is a fluke of history that you are here in this nation but luck is easily lost with bad management and naive aspirations.

It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveler will not suspect anything. At that moment the traveler comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism. And that, Ladies and Gentlemen, is how the bailout package works.

Humans originally existed as members of small bands of nomadic hunters/gatherers. They lived on deer in the mountains during the summer and would go to the coast and live on fish and lobster in the winter.The two most important events in all of history were the invention of beer and the invention of the wheel. The wheel was invented to get man to the beer. These were the foundation of modern civilization and together were the catalyst for the splitting of humanity into two distinct subgroups:

1 . Liberals, and

2   Labor.

Once beer was discovered, it required grain and that was the beginning of agriculture. Neither the glass bottle nor aluminium can were invented yet, so while our early humans were sitting around waiting for them to be invented, they just stayed close to the brewery. That’s how villages were formed.

Some men spent their days tracking and killing animals to BBQ at night while they were drinking beer. This was the beginning of what is known as the Liberal movement…

Other men who were weaker and less skilled at hunting learned to live off the Liberals by showing up for the nightly BBQ’s and doing the sewing, fetching, and hair dressing. This was the beginning of the Labor movement.

Some of these labor men eventually evolved into women. They became known as girlie-men. Some noteworthy Labor achievements include the domestication of cats, the invention of group therapy, group hugs, and the concept of democratic voting to decide how to divide the meat and beer that the Liberals provided.

Modern Laborites like imported beer (with lime added), but most prefer white wine or imported bottled water. They eat raw fish but like their beef well done. Sushi, tofu, and French food are standard Labor fare. Another interesting evolutionary side note: most of their women have higher testosterone levels than their men. Most social workers, personal injury lawyers, journalists, ABC staff and group therapists are Laborites.

Liberals drink domestic beer, mostly Carlton or XXXX. They eat red meat and still provide for their women. Liberals are big game hunters, rodeo cowboys, lumberjacks, construction workers, firemen, medical doctors, police officers, engineers, corporate executives, athletes, members of the military, airline pilots and generally anyone who works productively. Liberals who own companies hire other Liberals who want to work for a living.

Laborites produce little or nothing. They like to govern the producers and decide what to do with the production.  That is why most of the laborites created a business of trying to get more for nothing.

Here ends today’s lesson in world history:

It should be noted that a Laborite may have a momentary urge to angrily respond to the above before forwarding it.

A Liberal will simply laugh and be so convinced of the absolute truth of this history that it will be forwarded immediately to other true believers and to more labourites just to piss them off.

And there you have it. Let your next action reveal your true self, I’m going to have another beer.