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Consider for a moment, would you like to??
Add more revenue streams and greater profits with very little effort and investment?
Generate more clients and work within your own business?
Become part of a referral and opportunity flow network dedicated to delivering on client
outcomes?
If yes, then this is our invitation to you……..
Explore the opportunity of becoming a Strategic Partner with THE PROPERTY INVESTMENT INSTITUTE and to make a difference to both our clients and our collective businesses wealth creation success.
Who is THE PROPERTY INVESTMENT INSTITUTE?
THE PROPERTY INVESTMENT INSTITUTE is an Australian based company operating locally, regionally and nationally. We are passionate about achieving wealth and business creation results for our clients through leading edge strategies, opportunities and professional services. We provide a complete wealth and business solutions approach including
* Complete property solutions including advice, advocacy, property developments and investment opportunities.
* Access to all forms of finance and business expansion capital.
* Wealth Creation services, products and education.
* Business mentoring and also Imagineering Solutions (through our sister company HotIdeas)
What is the THE PROPERTY INVESTMENT INSTITUTE Strategic Partner Program?
The outcome when creating this initiative was to establish strategic relationships with other businesses and professionals who also want to make a difference to their clients/ contacts wealth and business creation potential and ultimately their lives by referring to our platform of services and opportunities. By becoming a strategic partner means being rewarded for your efforts, particularly in todays business environment where creating multiple streams of revenue is becoming essential to building the bottom line.
The guiding outcomes for the program is together to
* Create mutually beneficial relationships that attract, enable, and retain joint customers
* Identify new business opportunities with existing customers
* Develop lucrative opportunities through joint prospecting, lead qualification, and pipeline building
* Merge core competencies
Who can benefit from being part of the program
A potential strategic partner is simply a professional/business owner who has a database of clients and contacts with whom they have influence with and that on the strength of their recommendations will look at potential opportunities. Potential partners as an example can be,
* Accountants
* Lawyers
* Financial planners
* Finance brokers
* Business owners and consultants
The 3 reasons “why” for being a Strategic Partner
There are the 3 compelling reasons to partner with THE PROPERTY INVESTMENT INSTITUTE;
* 1 You add multiple revenue streams. By becoming a Strategic partner and referring clients to the THE PROPERTY INVESTMENT INSTITUTE's service platform, you add new cash flow opportunities in addition to your core business. Also for some of our strategic partners, by their clients choosing to do business with THE PROPERTY INVESTMENT INSTITUTE creates more work for them, e.g. if you are an Accountant, Solicitor or finance broker, the chances are they will need more of what you do.
* 2 We will show you how to get more clients.We will share with you the latest high impact low cost marketing strategies which will market you more powerfully and generate new profitable clients for your business. We run a series of Business Creator workshops that you will be invited to that will provide the marketing ideas, the collateral and the strategies that you can apply in your business to generate greater revenue results.
* 3 We will share with you powerful business building ideas.You will receive further invites to a variety of workshops designed for business leaders on a variety of business creation subjects.
JACK HENDERSON +61 411 752 216
THE PROPERTY INVESTMENT INSTITUTE & EQUINEX
Sunday, July 4, 2010
Wednesday, June 16, 2010
Your oceans, my oceans or the public's oceans
There's nothing the mainstream press enjoys more than an environmental disaster.
And paradoxically, there's nothing the green lobby gets a bigger kick from than an environmental disaster.
But the real disaster isn't the oil spill it's the fact that eleven people were killed when the oil rig exploded in late April.
Not that you hear too much about that.
You see, as terrible as it may seem, and as incomprehensible as the amount of oil leaking into the Gulf of Mexico is - up to 162,000 barrels equivalent per day - the long term effect of the oil spill is likely to be, well, hardly noticeable.
Sure, you've seen the protests about the impact on wildlife and oil washing up on the beaches. And sure, there have been plenty of references to the Exxon Valdez in 1989, which according to our friends at Wikipedia resulted in the deaths of "100,000 to as many as 250,000 seabirds."
We'll agree, that's a lot of birds. Although, when you put it in perspective, even the top-of-the-range number would have only resulted in a decline of the world bird population by 0.00025%.
And even the population of the formerly endangered bald eagle was barely dinted by the Exxon Valdez. According to the same Wikipedia reference, 247 bald eagles died following the incident.
If we assume they died as a direct result of the Exxon Valdez oil spill it still only reduced the total bald eagle population of the Alaska/British Columbia region by about 0.35%, given that population numbers in that region in the early 1990s were forecast to be between 60,000 and 80,000 individual birds.
In other words would would have taken a disaster 243 times larger than the Exxon Valdez to wipe out the entire bald eagle population.
So the miniscule impact on wildlife following that event hardly warrants the use of the term "ecological disaster."
Ecological annoyance would probably be more accurate.
Look, I'm not saying that you can just go around killing things and then say, "Oh, but it's only 0.0000000001% of the total population, it doesn't matter." What I am saying is this...
First of all, there's a tendency by the mainstream media to fall for the environmental propaganda too easily. All they need is a couple of videos of a budgie covered in oil and a distressed rock drenched in the same for it to make front page news.
But secondly, and perhaps more importantly, whenever such a "disaster" as this happens it's invariably the case that the blame is apportioned to the wrong person or organisation.
As you'll have noticed, the evildoer tag has been attached to BP, with the CEO Tony Hayward being cast as the Dick Dastardly of the corporate world.
But as is usually the case, the real cause of the problem has been overlooked. You see, it's not BP that is ultimately to blame, even though the oil has come from their oil rig. And it's not entirely the fault of the legislation passed in the US during the 1980s that limited the liability of oil companies to just USD$75 million if a spill occurred.
No, the ultimate cause of the problem is something as basic as a lack of private property rights.
Yep, that's right, a lack of private property rights over gulfs, oceans and shorelines is the direct and ultimate cause of the BP oil "disaster" and the Exxon Valdez oil "disaster", and any other oil disaster you can think of.
A few weeks ago Daily Reckoning editor Dan Denning referred to a term known as tragedy of the commons.
The gist of the argument is that property that is either owned communally or by no-one in particular is cared for less than property that is freely owned by a private individual or organisation.
You can see that in almost every instance in society. In most cases where property is privately owned and where the owner values the property, it is better taken care of than property that is publicly owned.
Which is exactly the reason why the oil spill in the Gulf of Mexico occurred.
A lack of private property rights over seas and oceans naturally means that individuals and organisations are less careful about what they do in it or to it.
As an aside, take for example the case of the young American lass who was trying to sail around the world and had to be rescued in the Indian Ocean at a cost of $300,000 to the Australian taxpayer.
Do you really think that if the oceans were privately owned the owner would allow a 16 year old to sail through unassisted, without paying a fee to do so, without insurance should an accident occur, or without paying the private owner an insurance fee in the event of a rescue being needed? Something not too dissimilar to the fees you pay to the RACV or NRMA I suppose!
Anyway, when nobody owns something then there's no recourse for compensation should you do any harm to it. Even if it's publicly owned property the quest for compensation will be less rigorous than if it's privately owned property.
Simply because of the lack of a profit motive and the lack of direct ownership. If oil washes ashore at a theme park located on a private beach and a public beach, odds are that the private owner will act faster to clear the mess as it could have an impact on revenues and profits.
But the public beach would have less of an incentive. The clean up process would probably need approval from committees or boards. It would need to be the "right" kind of cleaning process, not just any old process, and so on. The bureaucrats would be in their element. Looking busy doing nothing.
Then there's the matter of private ownership of the oceans. It's not such a crazy idea you know. It's no crazier than private ownership of land.
Of course we'll agree that it's harder to erect a fence in the middle of the Atlantic Ocean, but that's the beauty of technology that can simply and easily record boundaries electronically on maps. Just as national waters are recorded on maps today.
Consider the situation in the Gulf of Mexico right now if specific areas of the gulf were owned by the private sector. As an owner of a particular area you'd be keen to ensure that those using it took good care of it.
Not only because it would make it more attractive for others to do business there - eg. Other oil drillers or fishermen or tourist operators - but also because of the consequences of inappropriate actions by firms in your property could have on adjacent sea and land properties.
We've got no idea whether BP has been negligent with their drilling operations or not. But what we do know is, that if BP was drilling in a privately owned Gulf of Mexico, the private owner would want to be darn sure that BP was behaving itself.
The private owner would want to receive a fee from BP for the use of that particular sea area. Doubtless the owner would also want to make sure that BP had adequate insurance should anything happen.
The private owner may also provide addition services to those using it's sea property - such as oil spill services.
After all, an oil spill by one driller would have a major impact on other companies doing business in that area of private sea - other drillers, fishermen, shipping firms, etc.
And imagine the consequence of the oil drifting into adjacent sea areas.
For the private sea owner, if one business causes other businesses to stop using that area of the sea then that's going to be bad news for the owner.
But as another aside, what about other issues, such as piracy on the high seas? If you own a section of the ocean and you're able to charge ships to use it, you'd be able to attract more traffic if you can demonstrate how secure your section of the ocean is. That ships can pass freely without the fear of ambush.
Anyway, getting back to the oil spill. While BP is being cast as the villain, the truth is that BP isn't as villainous as the mainstream media, politicians and special interest groups claim.
I mean, does anyone seriously believe that BP intentionally caused the oil rig to explode, killing eleven men and releasing millions of barrels of oil into the Gulf of Mexico.
Yet listen to the mainstream knuckleheads and you'd think BP couldn't give a stuff that up to USD$11.3 million worth of oil is leaking into the Gulf each day. Could it really be true that BP doesn't care that it's losing so much money in potential profits?
No, of course it isn't. BP would rather have the oil flow into a tanker rather than into the sea.
However, because of a lack of private property rights there's no private owner putting pressure on BP to clean the mess up. In addition, there's no private owner who could have invested in equipment or chemicals to ensure the problem didn't spread into adjacent privately owned areas.
Or, there was no private owner to stipulate that BP should have an emergency plan in place should the worst occur.
Instead you've got US president Obama calling the oil spill "the worst environmental disaster America has ever faced." And claiming that he's going to "kick ass" - we assume he means kicking bottoms not kicking donkeys.
But funnily enough, nearly two months after the rig exploded we're yet to see exactly what governments or government agencies have done.
The fact is that if oceans were privately owned BP may never have been able to afford to locate a rig where it did. After all, drilling thousands of metres under the sea bed is pretty expensive and risky.
But as is usually the case, when you've got a government manipulating a market to encourage offshore exploration in areas that otherwise would not be economical, it will always create distortions and lead to unintended consequences.
Especially when a government passes a law limiting the liability of offshore drillers to just USD$75 million. Which - if you'll pardon the pun - is a drop in the ocean compared to the billions the clean-up is forecast to cost.
So look, I won't deny that perhaps BP deserves to shoulder some of the blame. But the fact remains that the biggest contributor to the current oil spill, the Exxon Valdez, and all other so-called environmental disasters is actually the basic lack of private property rights over the seas.
Cheers,
Kris Sayce.
Money Morning
And paradoxically, there's nothing the green lobby gets a bigger kick from than an environmental disaster.
But the real disaster isn't the oil spill it's the fact that eleven people were killed when the oil rig exploded in late April.
Not that you hear too much about that.
You see, as terrible as it may seem, and as incomprehensible as the amount of oil leaking into the Gulf of Mexico is - up to 162,000 barrels equivalent per day - the long term effect of the oil spill is likely to be, well, hardly noticeable.
Sure, you've seen the protests about the impact on wildlife and oil washing up on the beaches. And sure, there have been plenty of references to the Exxon Valdez in 1989, which according to our friends at Wikipedia resulted in the deaths of "100,000 to as many as 250,000 seabirds."
We'll agree, that's a lot of birds. Although, when you put it in perspective, even the top-of-the-range number would have only resulted in a decline of the world bird population by 0.00025%.
And even the population of the formerly endangered bald eagle was barely dinted by the Exxon Valdez. According to the same Wikipedia reference, 247 bald eagles died following the incident.
If we assume they died as a direct result of the Exxon Valdez oil spill it still only reduced the total bald eagle population of the Alaska/British Columbia region by about 0.35%, given that population numbers in that region in the early 1990s were forecast to be between 60,000 and 80,000 individual birds.
In other words would would have taken a disaster 243 times larger than the Exxon Valdez to wipe out the entire bald eagle population.
So the miniscule impact on wildlife following that event hardly warrants the use of the term "ecological disaster."
Ecological annoyance would probably be more accurate.
Look, I'm not saying that you can just go around killing things and then say, "Oh, but it's only 0.0000000001% of the total population, it doesn't matter." What I am saying is this...
First of all, there's a tendency by the mainstream media to fall for the environmental propaganda too easily. All they need is a couple of videos of a budgie covered in oil and a distressed rock drenched in the same for it to make front page news.
But secondly, and perhaps more importantly, whenever such a "disaster" as this happens it's invariably the case that the blame is apportioned to the wrong person or organisation.
As you'll have noticed, the evildoer tag has been attached to BP, with the CEO Tony Hayward being cast as the Dick Dastardly of the corporate world.
But as is usually the case, the real cause of the problem has been overlooked. You see, it's not BP that is ultimately to blame, even though the oil has come from their oil rig. And it's not entirely the fault of the legislation passed in the US during the 1980s that limited the liability of oil companies to just USD$75 million if a spill occurred.
No, the ultimate cause of the problem is something as basic as a lack of private property rights.
Yep, that's right, a lack of private property rights over gulfs, oceans and shorelines is the direct and ultimate cause of the BP oil "disaster" and the Exxon Valdez oil "disaster", and any other oil disaster you can think of.
A few weeks ago Daily Reckoning editor Dan Denning referred to a term known as tragedy of the commons.
The gist of the argument is that property that is either owned communally or by no-one in particular is cared for less than property that is freely owned by a private individual or organisation.
You can see that in almost every instance in society. In most cases where property is privately owned and where the owner values the property, it is better taken care of than property that is publicly owned.
Which is exactly the reason why the oil spill in the Gulf of Mexico occurred.
A lack of private property rights over seas and oceans naturally means that individuals and organisations are less careful about what they do in it or to it.
As an aside, take for example the case of the young American lass who was trying to sail around the world and had to be rescued in the Indian Ocean at a cost of $300,000 to the Australian taxpayer.
Do you really think that if the oceans were privately owned the owner would allow a 16 year old to sail through unassisted, without paying a fee to do so, without insurance should an accident occur, or without paying the private owner an insurance fee in the event of a rescue being needed? Something not too dissimilar to the fees you pay to the RACV or NRMA I suppose!
Anyway, when nobody owns something then there's no recourse for compensation should you do any harm to it. Even if it's publicly owned property the quest for compensation will be less rigorous than if it's privately owned property.
Simply because of the lack of a profit motive and the lack of direct ownership. If oil washes ashore at a theme park located on a private beach and a public beach, odds are that the private owner will act faster to clear the mess as it could have an impact on revenues and profits.
But the public beach would have less of an incentive. The clean up process would probably need approval from committees or boards. It would need to be the "right" kind of cleaning process, not just any old process, and so on. The bureaucrats would be in their element. Looking busy doing nothing.
Then there's the matter of private ownership of the oceans. It's not such a crazy idea you know. It's no crazier than private ownership of land.
Of course we'll agree that it's harder to erect a fence in the middle of the Atlantic Ocean, but that's the beauty of technology that can simply and easily record boundaries electronically on maps. Just as national waters are recorded on maps today.
Consider the situation in the Gulf of Mexico right now if specific areas of the gulf were owned by the private sector. As an owner of a particular area you'd be keen to ensure that those using it took good care of it.
Not only because it would make it more attractive for others to do business there - eg. Other oil drillers or fishermen or tourist operators - but also because of the consequences of inappropriate actions by firms in your property could have on adjacent sea and land properties.
We've got no idea whether BP has been negligent with their drilling operations or not. But what we do know is, that if BP was drilling in a privately owned Gulf of Mexico, the private owner would want to be darn sure that BP was behaving itself.
The private owner would want to receive a fee from BP for the use of that particular sea area. Doubtless the owner would also want to make sure that BP had adequate insurance should anything happen.
The private owner may also provide addition services to those using it's sea property - such as oil spill services.
After all, an oil spill by one driller would have a major impact on other companies doing business in that area of private sea - other drillers, fishermen, shipping firms, etc.
And imagine the consequence of the oil drifting into adjacent sea areas.
For the private sea owner, if one business causes other businesses to stop using that area of the sea then that's going to be bad news for the owner.
But as another aside, what about other issues, such as piracy on the high seas? If you own a section of the ocean and you're able to charge ships to use it, you'd be able to attract more traffic if you can demonstrate how secure your section of the ocean is. That ships can pass freely without the fear of ambush.
Anyway, getting back to the oil spill. While BP is being cast as the villain, the truth is that BP isn't as villainous as the mainstream media, politicians and special interest groups claim.
I mean, does anyone seriously believe that BP intentionally caused the oil rig to explode, killing eleven men and releasing millions of barrels of oil into the Gulf of Mexico.
Yet listen to the mainstream knuckleheads and you'd think BP couldn't give a stuff that up to USD$11.3 million worth of oil is leaking into the Gulf each day. Could it really be true that BP doesn't care that it's losing so much money in potential profits?
No, of course it isn't. BP would rather have the oil flow into a tanker rather than into the sea.
However, because of a lack of private property rights there's no private owner putting pressure on BP to clean the mess up. In addition, there's no private owner who could have invested in equipment or chemicals to ensure the problem didn't spread into adjacent privately owned areas.
Or, there was no private owner to stipulate that BP should have an emergency plan in place should the worst occur.
Instead you've got US president Obama calling the oil spill "the worst environmental disaster America has ever faced." And claiming that he's going to "kick ass" - we assume he means kicking bottoms not kicking donkeys.
But funnily enough, nearly two months after the rig exploded we're yet to see exactly what governments or government agencies have done.
The fact is that if oceans were privately owned BP may never have been able to afford to locate a rig where it did. After all, drilling thousands of metres under the sea bed is pretty expensive and risky.
But as is usually the case, when you've got a government manipulating a market to encourage offshore exploration in areas that otherwise would not be economical, it will always create distortions and lead to unintended consequences.
Especially when a government passes a law limiting the liability of offshore drillers to just USD$75 million. Which - if you'll pardon the pun - is a drop in the ocean compared to the billions the clean-up is forecast to cost.
So look, I won't deny that perhaps BP deserves to shoulder some of the blame. But the fact remains that the biggest contributor to the current oil spill, the Exxon Valdez, and all other so-called environmental disasters is actually the basic lack of private property rights over the seas.
Cheers,
Kris Sayce.
Money Morning
Tuesday, May 18, 2010
Aaaah Teresa. What you've done....
Hell explained by chemistry student!
by: Mr Nice Guy ( Friday, May 7, 10:00 )
The following is an actual question given on a University of Washington chemistry mid term.
The answer by one student was so 'profound' that the professor shared it with colleagues, via the Internet, which is, of course, why we now have the pleasure of enjoying it as well :
Bonus Question: Is Hell exothermic (gives off heat) or endothermic (absorbs heat)?
Most of the students wrote proofs of their beliefs using Boyle's Law (gas cools when it expands and heats when it is compressed) or some variant.
One student, however, wrote the following:
First, we need to know how the mass of Hell is changing in time. So we need to know the rate at which souls are moving into Hell and the rate at which they are leaving. I think that we can safely assume that once a soul gets to Hell, it will not leave. Therefore, no souls are leaving. As for how many souls are entering Hell, let's look at the different religions that exist in the world today.
Most of these religions state that if you are not a member of their religion, you will go to Hell. Since there is more than one of these religions and since people do not belong to more than one religion, we can project that all souls go to Hell. With birth and death rates as they are, we can expect the number of souls in Hell to increase exponentially. Now, we look at the rate of change of the volume in Hell because Boyle's Law states that in order for the temperature and pressure in Hell to stay the same, the volume of Hell has to expand proportionately as souls are added.
This gives two possibilities:
1. If Hell is expanding at a slower rate than the rate at which souls enter Hell, then the temperature and pressure in Hell will increase until all Hell breaks loose.
2. If Hell is expanding at a rate faster than the increase of souls in Hell, then the temperature and pressure will drop until Hell freezes over.
So which is it?
If we accept the postulate given to me by Teresa during my Freshman year that, 'It will be a cold day in Hell before I sleep with you,' and take into account the fact that I slept with her last night, then number two must be true, and thus I am sure that Hell is exothermic and has already frozen over. The corollary of this theory is that since Hell has frozen over, it follows that it is not accepting any more souls and is therefore, extinct ...... leaving only Heaven, thereby proving the existence of a divine being which explains why, last night, Teresa kept shouting 'Oh my God.'
THIS STUDENT RECEIVED AN A+.
Thanks to WWW.ZAZZ.COM.AU
by: Mr Nice Guy ( Friday, May 7, 10:00 )
The following is an actual question given on a University of Washington chemistry mid term.
The answer by one student was so 'profound' that the professor shared it with colleagues, via the Internet, which is, of course, why we now have the pleasure of enjoying it as well :
Bonus Question: Is Hell exothermic (gives off heat) or endothermic (absorbs heat)?
Most of the students wrote proofs of their beliefs using Boyle's Law (gas cools when it expands and heats when it is compressed) or some variant.
One student, however, wrote the following:
First, we need to know how the mass of Hell is changing in time. So we need to know the rate at which souls are moving into Hell and the rate at which they are leaving. I think that we can safely assume that once a soul gets to Hell, it will not leave. Therefore, no souls are leaving. As for how many souls are entering Hell, let's look at the different religions that exist in the world today.
Most of these religions state that if you are not a member of their religion, you will go to Hell. Since there is more than one of these religions and since people do not belong to more than one religion, we can project that all souls go to Hell. With birth and death rates as they are, we can expect the number of souls in Hell to increase exponentially. Now, we look at the rate of change of the volume in Hell because Boyle's Law states that in order for the temperature and pressure in Hell to stay the same, the volume of Hell has to expand proportionately as souls are added.
This gives two possibilities:
1. If Hell is expanding at a slower rate than the rate at which souls enter Hell, then the temperature and pressure in Hell will increase until all Hell breaks loose.
2. If Hell is expanding at a rate faster than the increase of souls in Hell, then the temperature and pressure will drop until Hell freezes over.
So which is it?
If we accept the postulate given to me by Teresa during my Freshman year that, 'It will be a cold day in Hell before I sleep with you,' and take into account the fact that I slept with her last night, then number two must be true, and thus I am sure that Hell is exothermic and has already frozen over. The corollary of this theory is that since Hell has frozen over, it follows that it is not accepting any more souls and is therefore, extinct ...... leaving only Heaven, thereby proving the existence of a divine being which explains why, last night, Teresa kept shouting 'Oh my God.'
THIS STUDENT RECEIVED AN A+.
Thanks to WWW.ZAZZ.COM.AU
Monday, May 17, 2010
Mr Henry, what have you done to us ???
What the Henry Review means for the property sector – RP Data
The comprehensive review of the Australian taxation system contained plenty of recommendations but resulted in little action from the Federal Government. For property investors the playing field remains largely unchanged.
Titled ‘Australia’s Future Tax System’, the Henry Review report spanned almost 1,000 pages and included 138 recommendations for taxation reform. The Review is arguably the most thorough assessment of the Australian taxation system and processes undertaken. The response from the Federal Government to the Henry Review has been characterised by a distinct lack of recognition for the vast majority of these recommendations.
The most significant recommendations to be supported by the Government were announced together with the report release on Sunday May 2. These included:
* A reduction in the company tax rate progressively from 30% to 28% by 2014/15.
* Superannuation reforms, including shifting the compulsory employer contribution from 9% to 12% by 2019/20 and a $500 annual superannuation bonus for workers earning under $37,000 per annum
* A 40% tax on profits from the resources sector (known as the Resource Super Profits Tax (RSPT)) which should funnel $12 billion in revenue to the Government over the first two years it is implemented.
* Establishment of a new infrastructure fund which will support state infrastructure projects.
The Henry Review had the potential to change the way Australian’s view the property market as an investment class The big ticket recommendations for the property sector were associated with negative gearing, capital gains tax and stamp duty reform – all of which remained virtually untouched in the Federal Government’s response to the review.
The Henry Review recommended replacing personal taxation discounts such as negative gearing and the 50% capital gains discount with a broader reaching 40% discount on interest income, net residential rental property income, capital gains and some interest expenses (recommendations 14 to 17). In the Federal Government’s response these recommendations were largely ignored.
Investors can continue to use negative gearing to offset losses on their investment property against their personal income tax and capital gains are still subject to a 50% discount if the asset is held longer than one year.
It should come as no surprise that these tax discounts remained untouched, particularly in an election year. One only has to cast their mind back to 1985 when Treasurer Paul Keating attempted to tamper with negative gearing, replacing the policy with a system that offset net losses against future profits. The result was that investment in property declined significantly and with no introduction of new rental stock, rental rates shot upwards. Two years later the policy was wound back.
With Australia being largely reliant on private investors to introduce new rental stock, the resulting reduction in new rental supply that would result from a downturn in investment would likely be fuel to the fire of an already undersupplied rental market.
The Review also recommended major changes to stamp duty provisions, where state based stamp duties would be replaced by a more efficient and broader based land tax system. The recommended land tax system would apply to all land holdings and use a sliding scale for assessment based on value per square metre. In this way, more valuable land would be taxed at higher rates and concessions would be given to low value and agricultural land where the dollar value per square metre is likely to be relatively low. Additionally, land tax would be applicable to individual properties rather than across aggregated land holdings.
The Government has not commented on this recommendation, apart from stating that the family home would be exempt from any land tax. Removing stamp duties will not be a decision the Government makes lightly, considering that stamp duty makes up about 34% of State Government property taxes (which in turn comprise about 45% of the entire State Government revenue base).
Another key section from the Henry Review relates to housing affordability and housing assistance. The review proposes:
* “a review of institutional arrangements (including administration) to ensure zoning and planning do not unnecessarily inhibit housing supply and housing affordability”; and
* a review of infrastructure charges / developer charges to ensure they appropriately price infrastructure contributions from developers to ensure unnecessary costs are avoided, transparency of these charges is improved and reductions in regulation are introduced that will streamline the development time frame.
* an increase in the maximum rate of rental assistance and a provision for escalations in rental assistance to be indexed to rental rates rather than CPI.
All of these recommendations have been ignored in the Federal Governments response to the Henry Review.
Whilst the Government’s response seems to lack a great deal of support for the recommendations contained in the ‘Australia’s Future Tax System’ report, it is still early days. There are likely to be further announcements as the Government releases budget papers next week. In particular, the Government is expected to announce further intentions for tax simplification and savings incentives such as tax breaks on bank savings.
Overall for the property sector, it is largely ‘business as usual’ and potentially a case of ‘watch this space’.
Article by RP Data - www.rpdata.com.au
The comprehensive review of the Australian taxation system contained plenty of recommendations but resulted in little action from the Federal Government. For property investors the playing field remains largely unchanged.
Titled ‘Australia’s Future Tax System’, the Henry Review report spanned almost 1,000 pages and included 138 recommendations for taxation reform. The Review is arguably the most thorough assessment of the Australian taxation system and processes undertaken. The response from the Federal Government to the Henry Review has been characterised by a distinct lack of recognition for the vast majority of these recommendations.
The most significant recommendations to be supported by the Government were announced together with the report release on Sunday May 2. These included:
* A reduction in the company tax rate progressively from 30% to 28% by 2014/15.
* Superannuation reforms, including shifting the compulsory employer contribution from 9% to 12% by 2019/20 and a $500 annual superannuation bonus for workers earning under $37,000 per annum
* A 40% tax on profits from the resources sector (known as the Resource Super Profits Tax (RSPT)) which should funnel $12 billion in revenue to the Government over the first two years it is implemented.
* Establishment of a new infrastructure fund which will support state infrastructure projects.
The Henry Review had the potential to change the way Australian’s view the property market as an investment class The big ticket recommendations for the property sector were associated with negative gearing, capital gains tax and stamp duty reform – all of which remained virtually untouched in the Federal Government’s response to the review.
The Henry Review recommended replacing personal taxation discounts such as negative gearing and the 50% capital gains discount with a broader reaching 40% discount on interest income, net residential rental property income, capital gains and some interest expenses (recommendations 14 to 17). In the Federal Government’s response these recommendations were largely ignored.
Investors can continue to use negative gearing to offset losses on their investment property against their personal income tax and capital gains are still subject to a 50% discount if the asset is held longer than one year.
It should come as no surprise that these tax discounts remained untouched, particularly in an election year. One only has to cast their mind back to 1985 when Treasurer Paul Keating attempted to tamper with negative gearing, replacing the policy with a system that offset net losses against future profits. The result was that investment in property declined significantly and with no introduction of new rental stock, rental rates shot upwards. Two years later the policy was wound back.
With Australia being largely reliant on private investors to introduce new rental stock, the resulting reduction in new rental supply that would result from a downturn in investment would likely be fuel to the fire of an already undersupplied rental market.
The Review also recommended major changes to stamp duty provisions, where state based stamp duties would be replaced by a more efficient and broader based land tax system. The recommended land tax system would apply to all land holdings and use a sliding scale for assessment based on value per square metre. In this way, more valuable land would be taxed at higher rates and concessions would be given to low value and agricultural land where the dollar value per square metre is likely to be relatively low. Additionally, land tax would be applicable to individual properties rather than across aggregated land holdings.
The Government has not commented on this recommendation, apart from stating that the family home would be exempt from any land tax. Removing stamp duties will not be a decision the Government makes lightly, considering that stamp duty makes up about 34% of State Government property taxes (which in turn comprise about 45% of the entire State Government revenue base).
Another key section from the Henry Review relates to housing affordability and housing assistance. The review proposes:
* “a review of institutional arrangements (including administration) to ensure zoning and planning do not unnecessarily inhibit housing supply and housing affordability”; and
* a review of infrastructure charges / developer charges to ensure they appropriately price infrastructure contributions from developers to ensure unnecessary costs are avoided, transparency of these charges is improved and reductions in regulation are introduced that will streamline the development time frame.
* an increase in the maximum rate of rental assistance and a provision for escalations in rental assistance to be indexed to rental rates rather than CPI.
All of these recommendations have been ignored in the Federal Governments response to the Henry Review.
Whilst the Government’s response seems to lack a great deal of support for the recommendations contained in the ‘Australia’s Future Tax System’ report, it is still early days. There are likely to be further announcements as the Government releases budget papers next week. In particular, the Government is expected to announce further intentions for tax simplification and savings incentives such as tax breaks on bank savings.
Overall for the property sector, it is largely ‘business as usual’ and potentially a case of ‘watch this space’.
Article by RP Data - www.rpdata.com.au
Tuesday, May 11, 2010
Budget 2010
Australia's Federal Budget 2010/11 - Making Sense of it
The Federal Budget is hardly the most riveting document you are ever likely to read. Sure you know it’s important, but the problem is that it’s a huge document with countless facts, figures and tables. And when it comes to analysis, economists seem to be writing for other economists; and accountants writing for other accountants.
It’s always important to remember that it is just a budget, the same that any household or company would prepare. Assumptions are made; forecasts are taken. And sometimes they can go awry – remember last year Treasury thought we were headed for recession, while unemployment was expected to hit 8.5 per cent. We didn’t experience a recession and unemployment peaked at 5.8 per cent.
At the end of the day most people want to know what’s in it for them. It doesn’t matter whether you are a student, pensioner or CEO of a major company.
So we have decided to make this analysis different.
Sure, there are the usual tables, graphs, facts and figures. But we reckon that there are only three questions most people want answered and that’s where we will be concentrating:
• Did the Government get it right?
• What does it mean for Australia?
• Who are the winners and losers?
First things first
• This year (2009/10) the budget deficit is tipped to hit $57.1 billion (4.4 per cent of our economy or GDP). Last November, a deficit of $57.7 billion was expected.
• Next year (2010/11) the deficit is tipped to be $40.8 billion (2.9 per cent of GDP), better than the $46.6 billion deficit forecast six months ago.
• The budget is expected to return to surplus three years early in 2012/13.
• Most of the measures have been previously announced: Health fund reform; company tax cut; resources super profits tax; increase in super fund levy and personal tax cuts.
Did the Government get it right?
• The Government believes that a no-frills, no-nonsense budget is required. We beg to differ. Australia was successful in avoiding recession last year and, unlike other advanced nations, is not weighed down by huge deficits and debits. We should be building on that success. Spending should be cut, not curbed, so that the Reserve Bank – and home-buyers – don’t have to shoulder the burden.
• But policy decisions since November last year increase the deficit by $3 billion. The Budget deficit is tipped to improve by over $16 billion next year, but none of the improvement is due to Government efforts. The deficit is expected to improve by over $31 billion in 2011/12 and only $600 million of that is due to Government.
• The Henry Tax Review has been handed down but the Government has only opted for only a handful of the 138 recommendations. But where the Government deserves credit is to show some discipline on spending. (Effectively it’s promised a lot, but nothing happens any time soon). So we give the Budget a mark of: 13/20.
• Of course, we have to take a moment to focus on the budget setting. Last year the budget was set against the background of the global financial crisis. One by one, major economies were slipping into recession, and while our government tried to protect our economy as much as possible, policy-makers seemed resigned to the fact that we would probably go down the same path.
• The Government spent freely by way of cash hand-outs; tax breaks for businesses; home insulation schemes; spending on schools; and building social housing. As a result the budget moved from a surplus of almost $20 billion to a deficit of just over $47 billion. The Reserve Bank slashed interest rates from 7.25 per cent to 3.00 per cent. And it worked – Australia avoided recession.
• Of course the fact that we did so well then caused some to argue that we spent too much and cut rates too far. Hindsight is a marvellous thing. But it seemed like the right idea at the time. Of course not all the money was well spent, but that’s another story.
• This year the budget has been set against the background of a domestic economy now doing perhaps a little too well. The Reserve Bank has been active in winding back the stimulus, lifting cash rates 1.5 percentage points in just eight months. There have been concerns that we are witnessing Mk II of the commodity boom, with consequences for economic growth and inflation in Australia.
• But in the last few weeks, the positive sentiment has been dented by the European debt crisis (EDC). Could this be the second act of last year’s financial crisis, leading to ‘W’-shaped economies? That is, many countries recorded ‘V-shaped’ recoveries, but are they now headed south again?
• We would argue that our economy remains in strong shape; that China will continue to expand strongly; that Greece won’t de-rail the global economy; and that the US economy is on the path to recovery. On that basis, the Government should be winding back stimulus to the economy.
• The Government has given a commitment not to increase spending by more than 2 per cent in real terms until the budget surplus is more than 1 per cent of GDP.
• But while the government is to be applauded for its commitment to restrain spending growth, it has been lazy in other areas of fiscal (budget) policy.
What does it mean for Australia?
• Managing the economy is very much a balancing act. The Reserve Bank has a role by setting interest rates (monetary policy). And the Government has a role in deciding what to spend, where to spend and how to pay for it (fiscal policy).
• You can’t have one arm of policy moving one way, and the other arm of policy moving the other way. But that is very much that situation. The Reserve Bank has been winding back stimulus and now arguably monetary policy is neutral – not boosting or slowing down the economy.
• Given that monetary policy alone is controlling our economy, we believe the cash rate will have to rise further over the coming year to around 6 per cent by the end of next year.
• Over the coming year, the budget deficit is expected to improve by around $16 billion or just over 1 per cent of GDP. But all of that will come by natural means or the “automatic stabilisers” – more employment, so less unemployment benefits and more taxes; and higher company profits, so again more taxes. But the government isn’t doing anything to improve the bottom line. That is, there is little in the way of discretionary measures to cut spending or boost revenues.
• Still, it is an election year. To what extent could we reasonably expect the Government to slash and burn in this environment?
Who are the winners & losers?
• Low-income earners: There is another round of tax cuts. But even for those on $50,000 a year it works out at just an extra $5.77 a week. Tax simplification and less tax on bank deposits – but you’ll have to wait. Workers under $37,000 get extra $500 in super.
• Middle-income earners: Someone on $100,000 a year gets an extra $9.62 a week from July 1 via tax cuts.
• High-income earners: Those on $150,000 a year get a tax cut of $19.23 a week.
• Pensioners: No change. Cheaper medications from health fund reforms.
• Investors: Most investors hope for a satisfactory negotiation between the Government and miners on the super profits tax.
• Companies: Nothing in the short-term. Small business gets a tax cut from July 2012.
Source Craig James, Chief Economist, CommSec
The Federal Budget is hardly the most riveting document you are ever likely to read. Sure you know it’s important, but the problem is that it’s a huge document with countless facts, figures and tables. And when it comes to analysis, economists seem to be writing for other economists; and accountants writing for other accountants.
It’s always important to remember that it is just a budget, the same that any household or company would prepare. Assumptions are made; forecasts are taken. And sometimes they can go awry – remember last year Treasury thought we were headed for recession, while unemployment was expected to hit 8.5 per cent. We didn’t experience a recession and unemployment peaked at 5.8 per cent.
At the end of the day most people want to know what’s in it for them. It doesn’t matter whether you are a student, pensioner or CEO of a major company.
So we have decided to make this analysis different.
Sure, there are the usual tables, graphs, facts and figures. But we reckon that there are only three questions most people want answered and that’s where we will be concentrating:
• Did the Government get it right?
• What does it mean for Australia?
• Who are the winners and losers?
First things first
• This year (2009/10) the budget deficit is tipped to hit $57.1 billion (4.4 per cent of our economy or GDP). Last November, a deficit of $57.7 billion was expected.
• Next year (2010/11) the deficit is tipped to be $40.8 billion (2.9 per cent of GDP), better than the $46.6 billion deficit forecast six months ago.
• The budget is expected to return to surplus three years early in 2012/13.
• Most of the measures have been previously announced: Health fund reform; company tax cut; resources super profits tax; increase in super fund levy and personal tax cuts.
Did the Government get it right?
• The Government believes that a no-frills, no-nonsense budget is required. We beg to differ. Australia was successful in avoiding recession last year and, unlike other advanced nations, is not weighed down by huge deficits and debits. We should be building on that success. Spending should be cut, not curbed, so that the Reserve Bank – and home-buyers – don’t have to shoulder the burden.
• But policy decisions since November last year increase the deficit by $3 billion. The Budget deficit is tipped to improve by over $16 billion next year, but none of the improvement is due to Government efforts. The deficit is expected to improve by over $31 billion in 2011/12 and only $600 million of that is due to Government.
• The Henry Tax Review has been handed down but the Government has only opted for only a handful of the 138 recommendations. But where the Government deserves credit is to show some discipline on spending. (Effectively it’s promised a lot, but nothing happens any time soon). So we give the Budget a mark of: 13/20.
• Of course, we have to take a moment to focus on the budget setting. Last year the budget was set against the background of the global financial crisis. One by one, major economies were slipping into recession, and while our government tried to protect our economy as much as possible, policy-makers seemed resigned to the fact that we would probably go down the same path.
• The Government spent freely by way of cash hand-outs; tax breaks for businesses; home insulation schemes; spending on schools; and building social housing. As a result the budget moved from a surplus of almost $20 billion to a deficit of just over $47 billion. The Reserve Bank slashed interest rates from 7.25 per cent to 3.00 per cent. And it worked – Australia avoided recession.
• Of course the fact that we did so well then caused some to argue that we spent too much and cut rates too far. Hindsight is a marvellous thing. But it seemed like the right idea at the time. Of course not all the money was well spent, but that’s another story.
• This year the budget has been set against the background of a domestic economy now doing perhaps a little too well. The Reserve Bank has been active in winding back the stimulus, lifting cash rates 1.5 percentage points in just eight months. There have been concerns that we are witnessing Mk II of the commodity boom, with consequences for economic growth and inflation in Australia.
• But in the last few weeks, the positive sentiment has been dented by the European debt crisis (EDC). Could this be the second act of last year’s financial crisis, leading to ‘W’-shaped economies? That is, many countries recorded ‘V-shaped’ recoveries, but are they now headed south again?
• We would argue that our economy remains in strong shape; that China will continue to expand strongly; that Greece won’t de-rail the global economy; and that the US economy is on the path to recovery. On that basis, the Government should be winding back stimulus to the economy.
• The Government has given a commitment not to increase spending by more than 2 per cent in real terms until the budget surplus is more than 1 per cent of GDP.
• But while the government is to be applauded for its commitment to restrain spending growth, it has been lazy in other areas of fiscal (budget) policy.
What does it mean for Australia?
• Managing the economy is very much a balancing act. The Reserve Bank has a role by setting interest rates (monetary policy). And the Government has a role in deciding what to spend, where to spend and how to pay for it (fiscal policy).
• You can’t have one arm of policy moving one way, and the other arm of policy moving the other way. But that is very much that situation. The Reserve Bank has been winding back stimulus and now arguably monetary policy is neutral – not boosting or slowing down the economy.
• Given that monetary policy alone is controlling our economy, we believe the cash rate will have to rise further over the coming year to around 6 per cent by the end of next year.
• Over the coming year, the budget deficit is expected to improve by around $16 billion or just over 1 per cent of GDP. But all of that will come by natural means or the “automatic stabilisers” – more employment, so less unemployment benefits and more taxes; and higher company profits, so again more taxes. But the government isn’t doing anything to improve the bottom line. That is, there is little in the way of discretionary measures to cut spending or boost revenues.
• Still, it is an election year. To what extent could we reasonably expect the Government to slash and burn in this environment?
Who are the winners & losers?
• Low-income earners: There is another round of tax cuts. But even for those on $50,000 a year it works out at just an extra $5.77 a week. Tax simplification and less tax on bank deposits – but you’ll have to wait. Workers under $37,000 get extra $500 in super.
• Middle-income earners: Someone on $100,000 a year gets an extra $9.62 a week from July 1 via tax cuts.
• High-income earners: Those on $150,000 a year get a tax cut of $19.23 a week.
• Pensioners: No change. Cheaper medications from health fund reforms.
• Investors: Most investors hope for a satisfactory negotiation between the Government and miners on the super profits tax.
• Companies: Nothing in the short-term. Small business gets a tax cut from July 2012.
Source Craig James, Chief Economist, CommSec
Wednesday, April 7, 2010
Bubbles Burst. Will this one? "NO" says RP Data
Wednesday, 07 April 2010
RP Data’s national research director Tim Lawless has slammed claims Australia is currently in a housing bubble.
According to Mr Lawless, a housing ‘bubble’ suggests housing values increased too rapidly and are set to experience a rapid decline, a fate not likely to come to fruition in Australia.
“Bubble is a word that has been used pretty loosely in relation to Australia’s real estate market since about 2003. Generally I would disagree with using this term,” he told Real Estate Business.
“Across Australia’s capital cities, home values have increased by just 6.2 percent per annum over the last five years – a rate of growth that is in line with wages growth which has been 6.0 per cent per annum over the same time frame.
“Rather than experience a rapid decline, my view is that home values will continue to show modest growth due to the ongoing under supply of dwellings and rapid population growth that creates demand for housing.”
Mr Lawless said despite the fact that 14,000 new homes are approved for construction each month, the rate of new dwelling approvals is much lower than what is required – approximately 17,400 new homes need to be approved each month.
“With such strong demand for new housing and an ongoing undersupply together with improving consumer and business confidence, it is reasonable to expect that the building industry will lift their game and start producing more housing stock. The strategic imperative is to deliver stock to the market that is aligned with consumer demand. That means a focus on developing affordable and well located housing stock,” Mr Lawless said.
RP Data’s national research director Tim Lawless has slammed claims Australia is currently in a housing bubble.
According to Mr Lawless, a housing ‘bubble’ suggests housing values increased too rapidly and are set to experience a rapid decline, a fate not likely to come to fruition in Australia.
“Bubble is a word that has been used pretty loosely in relation to Australia’s real estate market since about 2003. Generally I would disagree with using this term,” he told Real Estate Business.
“Across Australia’s capital cities, home values have increased by just 6.2 percent per annum over the last five years – a rate of growth that is in line with wages growth which has been 6.0 per cent per annum over the same time frame.
“Rather than experience a rapid decline, my view is that home values will continue to show modest growth due to the ongoing under supply of dwellings and rapid population growth that creates demand for housing.”
Mr Lawless said despite the fact that 14,000 new homes are approved for construction each month, the rate of new dwelling approvals is much lower than what is required – approximately 17,400 new homes need to be approved each month.
“With such strong demand for new housing and an ongoing undersupply together with improving consumer and business confidence, it is reasonable to expect that the building industry will lift their game and start producing more housing stock. The strategic imperative is to deliver stock to the market that is aligned with consumer demand. That means a focus on developing affordable and well located housing stock,” Mr Lawless said.
Tuesday, April 6, 2010
Wow ! Property is still the flavour in Australia.
Record home prices; Consumers curb spending
Home prices; Retail trade; Building Approvals; Private sector credit
• The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – reported that home prices rose by 1.4 per cent in February to record highs, after rising by a upwardly revised 2 per cent in January. Home prices are up 12.7 per cent on a year ago – the fastest rate in 25 months.
• Aussie consumer pared back on spending, with retail sales falling by 1.4 per cent in February. Department stores, retail chains and other large retailers recorded trend growth of just 0.1 per cent in February – the weakest reading in records going back almost 16 years.
• Dwelling approvals fell by 3.3 per cent in February, with the majority of the weakness centred on a slump in private sector apartments and houses. Dwelling approvals are still up 34.2 per cent on a year ago.
• Private sector credit rose by 0.4 per cent in February. Personal and housing credit were the key drivers, but business credit fell again. In annual terms personal credit was up 1.4 per cent - a 17 month high.
What does it all mean?
• Are below normal interest rates creating a housing bubble? Clearly that is likely to be a question that will be discussed by Reserve Bank policymakers at the interest rate meeting next week. And the latest round of data has added further colour to the debate.
• Despite four rate hikes house prices are continuing to defy the global property slowdown, rising by a further 1.4 per cent in February, with the annual growth rate at a 25-month high. While on the other side of the coin the withdrawal of stimulus has resulted in a slide in retail spending and building approvals.
• The latest round of retail sales data clearly highlights the difficult landscape faced by retailers. Consumer confidence maybe buoyant, however it certainly is not translating into robust spending. The anecdotal evidence suggests that retailers are continuing to discount in an attempt to entice consumers and CommSec would expects this trend to continue over the next few months.
• Department stores and large retailers which have been more successful in the past, compared to smaller retailers (given their ability to trim prices) have this time round highlighted the weak trading environment. Trend growth for the large retailers posted at a meagre 0.1 per cent in the latest month – marking the weakest reading in almost 16 years
• The weakness in the latest retail sales result effectively suggest that retail sales has been pretty flat since the start of the year – a result that has also been evident in the release of our Commonwealth Bank Business Sales Indicator (BSI).
• Dwelling approvals have slumped for the second consecutive month, with the majority of the weakness centred on private sector apartments and homes. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year and given the expiry of the first home buyer boost. Looking forward the housing sector is likely to cool over the next few months, however the sharp surge in construction loans over the past year will continue have multiplier effects through the economy – a result that has shown up in the retail sales data with furniture, home improvement retailers recording the best annual gains in more than three years.
• The healing process continues for lending, but it will be some time before growth rates are restored to normal levels. Personal lending is now starting to tick higher with the annual growth rate holding at a 17-month high, though early days still an encouraging sign on future activity.
• The latest figures on home prices indicate that a move to a more neutral interest rate setting will be on the agenda over the next few months. However given the weakness in consumer spending and building approval, the Reserve Bank should not rush the rate rise – especially given that the inflation environment remains very weak. On balance, CommSec believes that a pause in the rate hiking profile is likely to be the most likely outcome at the April meeting.
What do the figures show?
House Prices
• The RP Data-Rismark Hedonic Australian Home Value Index rose by 1.4 per cent In February after rising by a revised 2 percent in January.
• Home prices are up 12.7 per cent on a year ago from a low base. Annual growth is the fastest in 25 months.
• Over the three months to February the fastest price growth occurred in Melbourne (up 5.4 per cent) followed by Darwin (up 4.2 per cent), Sydney (up 3.8 per cent), Canberra (up 2.7 per cent Adelaide (up 3.2 per cent), Brisbane (up 1.8 per cent), and Sydney (up 1.7 per cent). Perth prices fell by 0.6 per cent while Hobart prices fell 0.1 per cent.
• In all capital cities home prices are higher than a year ago. Leading the way is Darwin (up 19.7 per cent) followed by Melbourne (up 19.3 per cent), Canberra (up 14.7 per cent), Sydney (up 12.3 per cent), Adelaide (up 9.1 per cent), Perth (up 7.5 per cent), and Brisbane (up 6.5 per cent).
• RP Data-Rismark calculates the median capital city house price across Australia at a record high of $548,413 with the median unit value at $450,619.
Retail trade:
• Retail trade fell by 1.4 per cent in February after a 1 per cent fall in January. In annual terms retail sales is up 3.4 per cent on a year ago – well below the long term average of 6.5 per cent.
• Sales by chain stores and other large retailers fell by 1.2 per cent in seasonally terms in February while sales by smaller retailers fell by 1.8 per cent. In annual terms sales at chain stores were up 5.3 per cent on a year ago while smaller retailers saw spending rise by just 0.3 per cent.
• Sales rose most at Furniture, floor covering and home ware store (up 1.9 per cent). In annual terms sales at furniture, floor covering and home ware stores rose by 11 per cent – the biggest annual increase in over 3 years.
• Sales fell the most at liquor retailers (down 5.1 per cent), department stores (down 3.9 per cent) and clothing and footwear retailers (down 3.9 per cent).
• Retail trade was down across all states except Tasmania (up 1.5 per cent) and Northern Territory (up 0.9 per cent). Spending fell most in NSW (down 2.5 per cent), South Australia (down 1.7 per cent), Western Australia (down 1.4 per cent), Victoria (down 0.9 per cent), ACT (down 0.8 per cent), and Queensland (down 0.8 per cent).
Building Approvals:
• New dwelling approvals fell by 3.3 per cent in February after falling 5.5 per cent in January. Dwelling approvals are now up 34.2 per cent on a year ago.
• House approvals rose by 0.7 per cent (private sector down 0.9 per cent) after rising 0.4 per cent in January. Apartment approvals fell by 12.3 per cent in February (private sector down 10.9 per cent) after sliding by 16.6 per cent in January. In annual terms apartment approvals are up 30.3 per cent on a year ago.
• Overall, the total value of building approvals (new houses, alterations and commercial) fell by 4.5 per cent in February to $5.9 billion. Commercial approvals fell by 13.0 per cent after sliding by 40.1 per cent in January. New residential approvals rose 0.5 per cent while renovations rose by 6.2 per cent.
• Over the year to January, total building approvals totalled $80.1 billion.
Private sector credit
• Private sector credit rose by 0.4 per cent in February after rising by 0.4 per cent in January. But the annual growth rate rose from 1.3 per cent to 1.6 per cent.
• Housing credit grew by 0.7 per cent in February with annual growth holding at a 17-month high of 8.5 per cent. Personal credit rose by 0.4 per cent in February after a 0.5 per cent increase in January. Personal credit is up 1.4 per cent over the past year – a 17-month high. And business credit fell for the 13th straight month, down by 0.1 per cent in February. Business credit is down 7.6 per cent on a year ago.
What is the importance of the economic data?
• The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 280,000 sales during 2009. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
• The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index.
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
What are the implications for interest rates and investors?
• For home-owners, the strong gains in house prices represent great news, serving to boost wealth levels and confidence. With most of the stimulus being pared back and the likelihood of further rate hikes, it is likely to dampen enthusiasm in the housing sector.
• CommSec expects that home prices will rise 5-8 per cent over 2010 and movements in prices over the last few months are consistent with those forecasts.
• The weakness in building approvals and volatility in retailers will ensure that the Reserve Bank treads warily in the rate hiking cycle.
Source Savanth Sebastian, Economist, CommSec
Home prices; Retail trade; Building Approvals; Private sector credit
• The RP Data-Rismark Hedonic Australian Home Value Index – the largest property database in Australia – reported that home prices rose by 1.4 per cent in February to record highs, after rising by a upwardly revised 2 per cent in January. Home prices are up 12.7 per cent on a year ago – the fastest rate in 25 months.
• Aussie consumer pared back on spending, with retail sales falling by 1.4 per cent in February. Department stores, retail chains and other large retailers recorded trend growth of just 0.1 per cent in February – the weakest reading in records going back almost 16 years.
• Dwelling approvals fell by 3.3 per cent in February, with the majority of the weakness centred on a slump in private sector apartments and houses. Dwelling approvals are still up 34.2 per cent on a year ago.
• Private sector credit rose by 0.4 per cent in February. Personal and housing credit were the key drivers, but business credit fell again. In annual terms personal credit was up 1.4 per cent - a 17 month high.
What does it all mean?
• Are below normal interest rates creating a housing bubble? Clearly that is likely to be a question that will be discussed by Reserve Bank policymakers at the interest rate meeting next week. And the latest round of data has added further colour to the debate.
• Despite four rate hikes house prices are continuing to defy the global property slowdown, rising by a further 1.4 per cent in February, with the annual growth rate at a 25-month high. While on the other side of the coin the withdrawal of stimulus has resulted in a slide in retail spending and building approvals.
• The latest round of retail sales data clearly highlights the difficult landscape faced by retailers. Consumer confidence maybe buoyant, however it certainly is not translating into robust spending. The anecdotal evidence suggests that retailers are continuing to discount in an attempt to entice consumers and CommSec would expects this trend to continue over the next few months.
• Department stores and large retailers which have been more successful in the past, compared to smaller retailers (given their ability to trim prices) have this time round highlighted the weak trading environment. Trend growth for the large retailers posted at a meagre 0.1 per cent in the latest month – marking the weakest reading in almost 16 years
• The weakness in the latest retail sales result effectively suggest that retail sales has been pretty flat since the start of the year – a result that has also been evident in the release of our Commonwealth Bank Business Sales Indicator (BSI).
• Dwelling approvals have slumped for the second consecutive month, with the majority of the weakness centred on private sector apartments and homes. It is understandable that a period of consolidation is to be expected after what has been a phenomenal run over the last year and given the expiry of the first home buyer boost. Looking forward the housing sector is likely to cool over the next few months, however the sharp surge in construction loans over the past year will continue have multiplier effects through the economy – a result that has shown up in the retail sales data with furniture, home improvement retailers recording the best annual gains in more than three years.
• The healing process continues for lending, but it will be some time before growth rates are restored to normal levels. Personal lending is now starting to tick higher with the annual growth rate holding at a 17-month high, though early days still an encouraging sign on future activity.
• The latest figures on home prices indicate that a move to a more neutral interest rate setting will be on the agenda over the next few months. However given the weakness in consumer spending and building approval, the Reserve Bank should not rush the rate rise – especially given that the inflation environment remains very weak. On balance, CommSec believes that a pause in the rate hiking profile is likely to be the most likely outcome at the April meeting.
What do the figures show?
House Prices
• The RP Data-Rismark Hedonic Australian Home Value Index rose by 1.4 per cent In February after rising by a revised 2 percent in January.
• Home prices are up 12.7 per cent on a year ago from a low base. Annual growth is the fastest in 25 months.
• Over the three months to February the fastest price growth occurred in Melbourne (up 5.4 per cent) followed by Darwin (up 4.2 per cent), Sydney (up 3.8 per cent), Canberra (up 2.7 per cent Adelaide (up 3.2 per cent), Brisbane (up 1.8 per cent), and Sydney (up 1.7 per cent). Perth prices fell by 0.6 per cent while Hobart prices fell 0.1 per cent.
• In all capital cities home prices are higher than a year ago. Leading the way is Darwin (up 19.7 per cent) followed by Melbourne (up 19.3 per cent), Canberra (up 14.7 per cent), Sydney (up 12.3 per cent), Adelaide (up 9.1 per cent), Perth (up 7.5 per cent), and Brisbane (up 6.5 per cent).
• RP Data-Rismark calculates the median capital city house price across Australia at a record high of $548,413 with the median unit value at $450,619.
Retail trade:
• Retail trade fell by 1.4 per cent in February after a 1 per cent fall in January. In annual terms retail sales is up 3.4 per cent on a year ago – well below the long term average of 6.5 per cent.
• Sales by chain stores and other large retailers fell by 1.2 per cent in seasonally terms in February while sales by smaller retailers fell by 1.8 per cent. In annual terms sales at chain stores were up 5.3 per cent on a year ago while smaller retailers saw spending rise by just 0.3 per cent.
• Sales rose most at Furniture, floor covering and home ware store (up 1.9 per cent). In annual terms sales at furniture, floor covering and home ware stores rose by 11 per cent – the biggest annual increase in over 3 years.
• Sales fell the most at liquor retailers (down 5.1 per cent), department stores (down 3.9 per cent) and clothing and footwear retailers (down 3.9 per cent).
• Retail trade was down across all states except Tasmania (up 1.5 per cent) and Northern Territory (up 0.9 per cent). Spending fell most in NSW (down 2.5 per cent), South Australia (down 1.7 per cent), Western Australia (down 1.4 per cent), Victoria (down 0.9 per cent), ACT (down 0.8 per cent), and Queensland (down 0.8 per cent).
Building Approvals:
• New dwelling approvals fell by 3.3 per cent in February after falling 5.5 per cent in January. Dwelling approvals are now up 34.2 per cent on a year ago.
• House approvals rose by 0.7 per cent (private sector down 0.9 per cent) after rising 0.4 per cent in January. Apartment approvals fell by 12.3 per cent in February (private sector down 10.9 per cent) after sliding by 16.6 per cent in January. In annual terms apartment approvals are up 30.3 per cent on a year ago.
• Overall, the total value of building approvals (new houses, alterations and commercial) fell by 4.5 per cent in February to $5.9 billion. Commercial approvals fell by 13.0 per cent after sliding by 40.1 per cent in January. New residential approvals rose 0.5 per cent while renovations rose by 6.2 per cent.
• Over the year to January, total building approvals totalled $80.1 billion.
Private sector credit
• Private sector credit rose by 0.4 per cent in February after rising by 0.4 per cent in January. But the annual growth rate rose from 1.3 per cent to 1.6 per cent.
• Housing credit grew by 0.7 per cent in February with annual growth holding at a 17-month high of 8.5 per cent. Personal credit rose by 0.4 per cent in February after a 0.5 per cent increase in January. Personal credit is up 1.4 per cent over the past year – a 17-month high. And business credit fell for the 13th straight month, down by 0.1 per cent in February. Business credit is down 7.6 per cent on a year ago.
What is the importance of the economic data?
• The RP Data-Rismark Hedonic Australian Home Value Index is based on Australia’s biggest property database including over 280,000 sales during 2009. Unlike the ABS Index, which excludes terraces, semi-detached homes and apartments, the RP Data-Rismark Hedonic Index includes all properties.
• The monthly RP Data-Rismark Hedonic Index compares month-to-month index results. Quarterly results are measured comparing end months rather than averaging each month in the quarter. For example, the first quarter of 2009 index results compare the end of March index with the end of December index.
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• The Bureau of Statistics' monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.
What are the implications for interest rates and investors?
• For home-owners, the strong gains in house prices represent great news, serving to boost wealth levels and confidence. With most of the stimulus being pared back and the likelihood of further rate hikes, it is likely to dampen enthusiasm in the housing sector.
• CommSec expects that home prices will rise 5-8 per cent over 2010 and movements in prices over the last few months are consistent with those forecasts.
• The weakness in building approvals and volatility in retailers will ensure that the Reserve Bank treads warily in the rate hiking cycle.
Source Savanth Sebastian, Economist, CommSec
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