Wednesday, April 30, 2008

Product Newsletter 1 May 2008

vacent building site in Ipswich (right)



If you are short on income to put an investment property in place, you could consider hosting an international student.

Companies such as will pay you $200+ per week per student.

That income will go a long way to fund the weekly contribution for your investment property.


The current debate about housing affordability is not new, according to the Reserve Bank’s head of economic analysis Anthony Richards.

In a paper delivered to the 2008 Economic and Social Outlook Conference in Melbourne on 27 March 2008, he said that there have been formal studies into this issue in 1977–78, in 1990–92 and 2003-04.
“One clear fact” said Richards, “is that in the 35 years since 1972, nationwide house prices have risen significantly faster than

(1) average household incomes
(2) house-building construction costs and
(3) interest rates”

But he cannot see any slowdown in the foreseeable future, because since 1982/83, while expenditure on servicing a mortgage has grown faster than income, the real residual income – i.e. after servicing a mortgage - has been growing at the rate of 0.5% pa.

So the community is better off, even allowing for increasing servicing of mortgage debt.


Journalists who write articles in the daily press are normally focused on the current news – not the significance of the underlying trends.

There is a classic example right now of how such journalists are misleading the public. When they write about house prices, they are reporting on today’s events – not the long term trend.

At best house prices around Australia are in a holding pattern – the fundamentals are such that any logical discussion of where house prices are going must conclude that the only way is up.

Look back at the newspapers of ten years ago – the headlines were exactly the same. The news doesn’t change. The digits behind the $ sign were different, but the headlines were the same.

Ten years ago the median house price in Sydney was $330,000 and in Brisbane it was $140,000. So if you hadn’t taken advice from the journalists of the day, and you had actually bought an investment property, you can see how much better off you would be now.

The same applies today. If your intention is to purchase an investment property for the long term gain, today the planets are in alignment. Don’t procrastinate and wait for prices to fall. You will probably be waiting until your “estate event” occurs.

Here are the fundamentals:

Firstly there is the underlying shortfall in housing construction. We need 180,000 new homes this year, but we are only building 150,000.

In fact, there has been an annual shortage since 1998, so the shortage is feeding upon itself.

In 2007, we built 150,000 homes, when the demand was 170,000.

In 2008, we are building 150,000 while demand is 180,000.

In 2009, forecasts are that we will build 140,000 while demand will be 190,000!

Secondly – the cost to create new accommodation keeps rising. Materials and wages keep rising, and local government keeps increasing the fees that developers must pay.

Thirdly, there is constant and increasing immigration.

Alex Joiner, Economist for Australia at ANZ Bank, says that part of the housing shortfall is due to increasing migration. Ten years ago the net annual migration figure was 70,000. Now it’s 170,000!

Joiner believes that the only possible scenario for house prices to fall would be a severe recession. But the resources boom will, in his mind, prevent the possibility of a major recession.

And this analysis doesn’t rely on which direction interest rates will go. If they increase, there will be fewer homes built. If they drop, more homes will eventually be built – but the lengthy approval process will preclude any rapid increase.

So go forth and invest. My conviction is that property will continue to increase in value, as it has done ever since our primitive ancestors first put stones at the corner of their fields to indicate ownership.

· There has never been a better time to put something extra aside for your retirement.

If you have any queries on how to move forward, feel free to phone me Bernard Kelly anytime on 0414 778 518 or cell 61- 414 778 518


One of the dangers of the new Transition to Retirement pensions is that the benefit is only so very, very modest.

A number of reports are suggesting that you can boost your pool of superannuation entitlements by radically reducing your taxable income by salary sacrificing, and drawing a “top up” pension so that your lifestyle doesn’t suffer.

This is true, however the amount that you can boost your pool of superannuation entitlements can be very, very modest.

If you are aged 60 and earning $95,000, by salary sacrificing say $65,000 and reducing your income to $30,000 (but taking out enough from your existing super to maintain your lifestyle) you could boost your salary package by $13,975.

Now compounding this $13,975 at 7% over 5 years, the net benefit is only $80,366.

Just imagine if this person had put an investment property in place. The net benefit can be expected to far, far greater than just $80,366.

· If you don’t think that you will have enough, don’t even think about a TTR pension. I have the key to unlock a far better solution.

· Phone me Bernard Kelly anytime on 0414 778 518 and I’ll help you explore your options.



Very few people know that the border between Western Australia and South Australia was proclaimed in 1494.

Ask anyone. Typically they will respond “was it around 1830?”

What actually happened was that two years after Columbus discovered the “new world” in 1492, Spain and Portugal went to war over the wealth of South America.

The Pope was called in to referee, and by the
Treaty of Tordesillas, 1494, Spain and Portugal divided the New World between themselves.

The Pope drew a line down through the centre of South America – at
longitude 129° - and carried the line right up and over the north pole and down the other side.

Thus Portugal became entitled to everything from the middle of South America – principally Brazil - right around across Africa (which is why they speak Portuguese in Angola and Mozambique) onwards past Goa and onto Portuguese East Timor and Macao.

The Spanish dominions included all of the western half of South America – where they all speak Spanish – and right across the Pacific Ocean out past the Philippines.

So when Captain Phillip arrived in Sydney cove in 1788, his commission was to occupy “the Spanish lands in New Holland”.

And when Captain Stirling arrived in the Swan River in 1829, his commission was to occupy “the Portuguese lands in New Holland”.

So now you know. 1494 was the year.