The absence of financial understanding is putting single women and solo mums in a powerless situation.

Solo woman and more so solo mums have indicated that their lack of understanding financial matters has been their hardest challenge for improving after monetary impediment as stated by Galaxy Research for State Custodians Home Loans.

Galaxy Research questioned 1,005 persons in the country and queried how they would cope with financial problems such as being made redundant, family breakage, serious illnesses or death in the family.

Almost half of all single women (46%), and especially three in five solo mums (60%), admitted to not having sufficient knowledge about money to be able to comprehend what to do or where to get some help; and that would be their biggest issue to getting back on track with their finances or money-related housing problems.

Somewhat disturbingly, 37 % of single women and 46 % of solo mums confessed delaying for too long addressing their situation in the expectation that their financial state of affairs would “just somehow resolve itself on its own”.

The latest ANZ Survey of Adult Financial Literacy in Australia report exposed that women had inferior marks in general compared to men on financial understanding and expertise from 28 years old and beyond.

Joanna Pretty, General Manager at State Custodians Home Loans said her company frequently guided single women in problematic financial situations.

“Most women usually spend some proportion of their lives on their own – whether it’s by choice or circumstance,” she said. “Given that women are living longer lives, it is vital single women financially educate themselves in the event of a crisis. This also applies to women in a couple, who leave money matters up to their partner because they’re also at risk if they suddenly become single and don’t know how to handle finances.”

Here are some steps for women to empower themselves money wise:

In case of a financial “Crisis” happening:

1. Build up an emergency fund (about 3-6 months of savings to sustain yourself)
2. Live according to your resources. Write your crucial and non-crucial expenditures and be truthful regarding your actual and upcoming income ability. Only spend what you can afford.
3. Gain some financial instruction. Verify your superannuation; check your bank accounts for hidden fees; think of changing your mortgage to a lower rate and of seeing a financial planner to assist and guide you.

Finding It Difficult to Borrow Enough to Buy an Investment Property?

Whilst all of us would love to have an impressive property investment portfolio to retire on, many people just can’t get enough equity together to buy their first property to start to build their private wealth portfolio.

If you find yourself in this situation perhaps think about purchasing an investment property to share with a close relative or trusted friend.

At the moment interest rates are still low and good deals are still being offered by the banks and in most cases having two or more people on a loan application will increase the chances of receiving a finance approval.

Whilst there are many benefits to sharing an investment property, not the least of which is reducing tax with investment deductions, diligence should be exercised to arranging clear documentation with a lawyer to protect each party in the event of circumstances changing and the property needing to be either sold outright or one or other of the parties wishing to buy the other party’s share. These types of agreements will outline the steps to resolve most issues which may arise due to unforeseen circumstances and will provide all parties with an agreeable exit strategy should the need arise.

Ultimately, buying a property with a family member or close friend could be the first step to securing your first investment property and help you to build your property portfolio sooner.

Reserve Bank Governor Sees the World in Lasting Growth Phase

As interest rates remain on hold the news is positive for those looking to boost their investments and build their private wealth.

The Reserve Bank ‘has been buoyed by hard evidence the global economy has decisively entered a lasting expansionary phase, which will ultimately increase the central bank’s scope to reverse official interest rate cuts blamed for the overheating Sydney and Melbourne property markets’ reported the Australian Financial Review today.

Governor Philip Lowe emphasised positive developments and noted above average consumer and business sentiment with a rise in investment spending and household consumption.

As several Australian locations were recently tipped to be one of the most sought after areas to reside worldwide, property is the most likely investment for those looking to build their portfolios with reported returns of up to 19% over the past five years and record low interest rates on mortgages. Conditions are still positive for people wanting to invest and who are in a position to get into the market while the rates are low and they can lock in a great fixed interest rate.

Affordable Housing Becoming Increasingly Difficult to Find.

As the demand for Australians to own their own home is as strong as ever, it is becoming increasingly difficult to achieve that result especially for the low to medium income first home buyers.

Information available from CoreLogic RP Data shows that at the end of 2016, 7.6% of suburbs nationally had a median house value under $200,000, and 5.9% of suburbs had a median unit value below $200,000. To put these figures into perspective, 11.4% of suburbs had a median house value of at least $1m and 3% of suburbs had a median unit value of at least $1m. The data shows that there are more Sydney suburbs with a median house value of at least $2m than there are houses with a median value of less than $600,000.

Over the span of the past five years to the end of 2016, a substantial decline has occurred in the proportion of suburbs with a median value below $400,000.

By contrast:
2011 53% of suburbs had a median house value of less than $400,000
69.8% of suburbs had a median unit value of less than $400,000
2016 41% of suburbs had a median house value of less than $400,000
53% of suburbs had a media unit value of less than $400,000

Reviewing data on the individual capital cities over the past five years highlights the rise in property values nationally, particularly in Sydney and Melbourne.

Five years ago, with the exception of Darwin and Canberra, every capital city had at least 20% of its suburbs with a median house value of less than $400,000. In comparison, at the end of last year, it was virtually impossible to find houses for less than $400,000 in Sydney, Canberra, and Darwin with less than 7% of suburbs in Melbourne having a median house value below $400,000.

Mr Kusher from CoreLogic RP Data stated “we noted that across each city there has been a substantial decline in affordable housing over the past year despite the fact that outside of Sydney and Melbourne there has been only moderate value growth over the period …… even units recorded a fairly substantial decline in the proportion of suburbs with a median value of less than $400,000 over the past five years.”

The data highlights the bracket creep that has occurred over the housing growth cycle, and how housing affordability in NSW (Sydney) and to a lesser degree Vic (Melbourne) has deteriorated. An increasing number of suburbs in these two states now have a median value of at least $1 million.

Given more than half of the suburbs in the million-dollar club are located in NSW, it’s no surprise that NSW dominates the list of the most expensive suburbs, with all but two of the nation’s 25 most expensive located in NSW and more specifically, Sydney.

China’s Crackdown on Capital Outflows

The Chinese government’s extensive crackdown on money exiting the country could hit the Australian property market hard, as private Chinese investors could experience problems settling on deals, following implications of tighter controls on capital outflows, which were announced late last year by various Chinese government departments.

The measures, which involve the stricter monitoring of existing rules and a crackdown on the nature of overseas investments by private and state-owned enterprises, were designed to help stabilise the renminbi (the official currency of the People’s Republic of China), following record amounts of capital exiting the country.

Simon Gleave, KPMG’s head of financial services in China commented –
“Last year an estimated [$1.04 trillion] flowed out of China. It is an astonishing amount of money to be leaving the country when you have a closed capital account,”.

Foreign investments in Australia by Chinese companies could be dealt a serious blow, particularly if Chinese authorities consider these investments to be of a speculative nature rather than as part of the company’s core business.

Under the new measures, an offshore investment by a state-owned enterprise in its core areas would be approved, such as a state-owned bank buying into an offshore bank. However, if a company was looking to make a very large offshore transaction or one outside its core business (such as a state-owned bank investing in mining), then authorities would take a much tougher approach to requests to take foreign exchange out of the country.

Beijing’s crackdown follows a plummet in the country’s level of foreign exchange reserves, from approximately US$4trn in mid-2014 to approximately US$3trn at the moment.

Purchase of Australian Urban Property
The following individuals are not required to seek approval from the Australian Foreign Investment Review Board (FIRB) for the purchase of Australian residential real estate:
• Australian citizens living abroad purchasing either in their own name or through an Australian corporation or a trust;
• Foreign nationals who are the holders of permanent resident visas or are holders, or are entitled to hold, a ‘special category visa’ purchasing either in their own name or through an Australian corporation or a trust; and
• foreign nationals purchasing, as joint tenants, with their Australian citizen spouse.

Foreign persons are normally given approval to buy:
• Vacant land for development, including house and land packages where construction has not commenced, subject to a condition imposed under the Foreign Acquisitions and Takeovers Act 1975 (FATA) that construction is completed within 4 years of their application being approved for residential developments, or continuous construction is commenced within 5 years for commercial developments; and
• New dwellings such as house and land packages, home units and townhouses purchased ‘off the plan’ that is under construction or newly constructed, but never occupied or previously sold. ‘Off the plan’ sales to foreigners are only permitted for new development projects or extensively refurbished commercial structures, which have been converted to residential, on condition that no more than half the dwellings in a development are sold to foreign persons.
• Certain categories of foreign nationals, who hold a visa that permits them to reside in Australia continuously for at least the next 12 months, may be given approval to purchase established residential real estate (that is, second hand dwellings) for use as their principal place of residence (that is, not for rental purposes) while in Australia. A condition of such purchases is that the dwelling must be sold when the foreign nationals’ temporary resident visas expire, they leave Australia, or the property is no longer used as their principal place of residence.
• Foreign companies, with an established substantial business in Australia, buying for named senior executives resident in Australia for periods longer than 12 months, may be eligible for approval provided the accommodation is sold when no longer required for this purpose. Whether a company is eligible, and the number of properties that may be acquired, will depend upon the extent of the foreign company’s operations and assets in Australia. Unless there are special circumstances, foreign companies normally will not be permitted to buy more than two houses under this category. Foreign companies would not be eligible under this category where the property would represent a significant proportion of its assets in Australia.
Proposals by foreign persons to acquire developed residential real estate that do not fall within the above categories are subject to the FATA, but are not normally approved.

Property Remains an ‘Optimistic’ Topic for 2017.

In a new member survey from the Property Investment Professionals of Australia (PIPA), property professionals throughout the country remain optimistic on the year ahead, despite market uncertainties. Careful selection criteria can still provide investors with opportunities to increase their private wealth by investing in quality real estate.

More than half (54%) of surveyed property professionals are “very optimistic” about business conditions this year, while another 43% are “optimistic”—despite the challenges with the banks tightening their lending criteria, changes to taxation legislation and potential interest rate increases.

PIPA’s survey gathered insights from a range of professionals who form the peak association for property investment, including Qualified Property Investment Advisers (QPIAs), buyers agents, and mortgage brokers.

“It is encouraging to see property professionals so confident about the outlook for their businesses and this sector more broadly,” said PIPA chair Ben Kingsley. “These results are testament to the increasing professionalism of the property investment industry and the diversified businesses our members are building, ensuring they can navigate various market cycles.”

As for potential setbacks, property professionals expressed concern about the tightening of investor lending, followed by soaring interest rates.

The Australian Prudential Regulation Authority (the prudential regulator of the financial services industry) approach to managing investor lending has raised both concerns and question marks for the industry commented Mr Kingsley. He believes alternative measures could greatly assist in better managing Australia’s property investment market.

“The government and industry regulators should be addressing the need for comprehensive regulation of property investment advice. Introducing a minimum standard of education or qualification for those providing property investment advice would ensure that Australian investors can receive the same level of appropriate guidance provided to anyone investing in other asset classes,” he said.

“Well-selected property remains a compelling long-term investment. Ensuring investors make well-informed, smart decisions, and that they are well protected from dodgy operators, would go a long way towards reducing the number of ill-fated property investment stories and buttressing the market.”

PIPA’s member survey also revealed that Brisbane is the preferred destination among property market professionals, with around 44% of respondents placing this city among the best investment prospects this year.

Australia now the third most expensive housing market in the World.

In January 2016 Sydney and Melbourne both received the dubious honour of being ranked inside the top 10 least affordable major metropolitan housing markets in the latest edition of the Annual Demographia International Housing Affordability Survey. Demographia’s ‘median multiple’ approach has firmly established a benchmark for housing affordability by linking median house prices to median household incomes. It is as simple as it is ingenious and it is probably the index most cited with regard to housing affordability.
The ‘median multiple’ is not a perfect measure because it does not account for house sizes or build quality. But it is the only index that allows a quick comparison of different housing markets, and it is the best approximation of housing affordability measures we have to date.
Business owners and investors are confronted by headlines about tin sheds selling for millions of dollars in Sydney with land prices soaring in some cases way beyond what is a viable proposition for the average Australian. Ordinary Aussies are now also faced with a growing national housing affordability crisis, many Aussies wouldn’t be surprised to learn that housing in Australia’s major cities is among the least affordable in the world.

In a recent survey, Sydney came in number two on the list, with the survey claiming a median home in the city will cost buyers 12.2 times their median annual income.

Compared to the previous edition of the survey, buyers in Sydney now require an additional 2.4 times their median income to afford a median home, which is the largest annual increase recorded in the survey’s 12-year history.

International housing affordability think tank Demographia recently released its 13th survey on house prices around the world, analysing prices from the third quarter of 2016. The survey found that Sydney has the second most unaffordable major city housing in the world. Melbourne trailed closely behind, coming in at number 6 on the list.

Australia on the whole, was found to have the third most expensive housing market in the world. Hong Kong took first spot and New Zealand came in second place.

The survey compares average home prices to median income, and comprised 94 major cities and 406 areas in total and among the 94 severely unaffordable markets, 33 are in Australia,

The results suggest that housing that is three times the median income, or less, is unaffordable and in addition, houses that cost more than five times the median income are considered severely unaffordable.

Sydney’s housing is 12.2 times the median income and Melbourne’s is 9.5 times the median income and therefore way out of reach of the average Australian wishing to establish his/her family in what would be considered the hub radius of the cities.

Brisbane, Adelaide and Perth were also ranked severely unaffordable, coming in at 6.2, 6.6, and 6.1 times the median income respectively.

Government seizes property back from foreign nationals.

As property prices rise around the country and property transactions still inspire confidence in investors to build their own private wealth, the government is cracking down on property illegally acquired by foreign investors with fifteen properties in Victoria and Queensland, worth a combined $14m, forcibly sold off in the latest round of divestments triggered by the Australian Taxation Office’s ongoing investigations.

Treasurer Scott Morrison said that to date, foreign investors have been forced to sell off more than $100m worth of illegally acquired Australian real estate. This brings the total number of forced sales of properties in breach of foreign investment rules to 61. The properties have a combined value of around $107m.

Mr Morrison said 179 notices were issued in September to foreign investors who broke the law when purchasing property in Australia. These properties were purchased in New South Wales, Queensland, Victoria, and Western Australia, for prices ranging from $200,000 to $2m. The buyers came from the United Kingdom, Malaysia, China, and Canada.

According to Mr Morrison, some “2,200 matters” are currently being reviewed by the Foreign Investment Review Board, with an estimated 400 “remaining under active investigation since the new regime.”

Speaking to Sky News on Monday, Mr Morrison said the residential real estate assets that were illegally acquired by foreigners were not limited to the prestige market, but also encompassed the lower end of the market. This had the unfortunate effect of locking average Australians out of the property market.

Foreign nationals who illegally acquire property are forced to pay a percentage of the value of the home as a “civil penalty.”

“We’re trying to ensure, I think with some success, that our foreign investment rules are enforced on every occasion,” Mr Morrison said. “And to those who think they can then creep in and snatch away some property from the hands of Australian homebuyers, well we’ve got news for you: you’ll be forced to sell it and do that forthwith.”

To avoid getting involved in potential debacles, sellers should consider these valuable tips when dealing with foreign buyers:

1. Complete due diligence about the buyer: Sellers should ask their solicitor to complete due diligence about the buyer. Among other things, it needs to be ascertained if the buyer is an Australian citizen, and whether he or she has the right to buy new or existing property under Australian law.

2. Seek professional assistance: Sellers should find a solicitor and financial adviser with extensive experience in international property transactions. This can be difficult as transactions might involve other legal systems and/or overseas banks.
Ensure that your solicitor checks that any sale to an overseas buyer has been approved by the Australian Foreign Investment Review Board and that the finance being used to complete the settlement is from a known and reputable lending institution.

How Property Investors Can Reduce The Taxation Burden

For the average Australian looking to build a secure base for his/her retirement, premium property investment may have the potential to provide the means, however whilst great returns may look promising, exorbitant stamp duty costs have become increasingly burdensome for even the most savvy investor.

Stamp duty for property purchase in larger capital cites may see averages of more than $30,000 of the investor’s funds, which could have been used to purchase a tangible asset like a car, or renovations to an existing home.

State governments particularly in NSW and Victoria are currently collecting substantial funds from property taxes, and whilst ever property prices are on the rise this is likely to continue as stamp duty and the like are calculated on a scale relative to the valuation/purchase price.

As government moves to phase retirement pensions, forcing the population to create their own private wealth to fund their futures, property is still seen to be the most secure investment in our futures, albeit though it comes with significant initial expense.

Between all levels of government more than $45bn annually is collected in property taxes, which have risen by 42% since 2010 compared to total GST collections, which have only increased by around 17%

To ease this large taxation burden, more and more property investors are taking advantage of legitimate tax benefits that flow from investing in property. In fact, just one tax depreciation report for an investment property can generate thousands of dollars in potential tax savings annually.

Tax depreciation benefits associated with owning investment properties can be equivalent to approximately 60% of the annual rental income of an investment property. For the initial cost of a tax depreciation report (which is required to be undertaken by a qualified professional), clients can enjoy thousands of dollars in tax benefits each year from their investments by legitimately claiming their full depreciation allowances.

It is important to seek the advice of a good Financial Advisor who will work collaboratively with your accountant to ensure that the full taxable benefits are realised on the purchase of your investment property.

You may not get to retire!

It’s highly plausible that a long retirement is not in my future. Just like a free college education and affordable housing, it might be following the list of items Baby Boomers enjoyed but the modern generation will never get to see.

This is an extract from The Australian government’s website: “By the time you are 55, you might be thinking about retirement and what to do once you stop working.” If you demand to stop working at age 55, you probably work at an investment bank. By age 55 you’d have clocked up around 30 years of work – slightly less if you took a bit of time off over the years.

We are starting work later and getting married later and signing up to buy a house later. Four out of 10 first home buyers are over the age of 35, according to official statistics. If you acquire a 30-year mortgage at the age of 40, you are likely not to be ready to retire by 60.

Paying off your mortgage as well as contributing to your superannuation is next to impossible. The average superannuation amongst 60-year-old couples is around $300,000. With most of their savings tied up in the family home, it’s hard to access the money to “live it up” in retirement.

This means that retirement is expected to depend on some form of pension. And if you think the Government wants to pay your pension, keep dreaming. Instead, we will be forced to stay in the workforce longer. With plans to move the retirement age from 65 to 67, I can only imagine what they will be thinking when it comes to my time to retire. By looking at the life expectancy of Australians’ in becomes clear to see why they keep trying to move the pension age higher. More people are getting the pension, and for longer. If medicine advances faster than expected, life expectancy by 2055 could be higher than this graph shows. That could mean 25 years of pension payments for the average Aussie, or even more.

100 years ago everyone expected to work until the day they died. And at this rate, it looks like we’re heading back in into History for the retirement ideology.