Hello,

March 2012

There's no shortage of news these days about interest rates, home loans and property prices, but sometimes the messages we hear can be confusing or misleading.

In this newsletter we look at some of the important issues our clients are coming to us with questions about. We start below with an article on 'Australia's housing price bubble' and why we shouldn't be worried about it. This is followed up on the inside pages with an article on dealing with 'what if' scenarios in investment property (page 2) and whether the time is right to fix your home loan (page 3).

Lastly we take a look at technology – what's in (thin, apps, touch and voice control) and what's out (email).

Enjoy this newsletter and feel free to pass it on to family and friends.

Kind Regards,

Patrick Marion
Director - Citiwide Mortgage Services
Patrick Marion Citiwide Mortgage Services
333 Queensberry Street
North Melbourne VIC3051

Tel: 1300 732 630
Mob: 0411 461 197
Fax: (03) 9326 6305
In This Issue
1. Price Bubble Debunked
2. What if...
3. Book Review
4. Fix or not?
5. Technology Trends
6. Did you know?
Links and Other Options
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Price Bubble Debunked

Despite talk of a housing price bubble, ANZ research shows there is little chance of a housing market crash this year. The bank forecasts prices to remain on hold or fall slightly, but not crash. 

In its recent property market assessment, ANZ argues that gains in house prices have been driven by lower interest rates and an increase in household income.

The ANZ 'Australian Housing Chartbook' reports: "A combination of lower interest rates, falling house prices and rising household incomes has improved Australian house purchase affordability over the past 12 months."

"Despite the continued concerns about significant Australian house price overvaluation from some commentators, housing market fundamentals remain supportive."

This is backed up by ANZ compiled data on international house prices, rental yields and house price-to-income ratio comparisons – showing Australian house prices have not deviated from international trends. 

HSBC Bank chief economist Paul Bloxham agrees that there is little to fear from a price bubble. In the recent HSBC global research report 'Australia in 2012', he states there are three main reasons why prices won't plummet: the majority of houses can service their debt; the undersupply of housing is growing at a greater rate than the decline in population growth; and there is strong demand for housing close to major urban centres.

"We remain unconcerned about the possibility of a large decline in housing prices this year," concludes Bloxham.

What if...

Considering investing in property, but worried about all the things that might go wrong? Here we look at how to deal with a number of common 'what if' scenarios.

What if I buy the wrong property?
Rental yield, capital growth, tenant quality and demand should be upmost in your mind when searching for properties, which means not allowing your emotions or personal preferences to influence your decision.
Think about what appeals to a tenant and what property types are in demand now and in the future. Researching your market is an important part of knowing what features tenants are looking for.

What if I have problems with my tenants?
Screening tenants before signing contracts is the single most important tip for protecting yourself against this scenario. If you choose to hire a property manager to screen tenants, make sure their process is thorough and detailed, like using industry databases that list bad tenants. Conduct as many background checks as privacy laws allow and always ask for the tenant’s references to include company names (not just mobile numbers) to ensure their legitimacy.
Remain vigilant after the tenant has moved in by conducting regular general property inspections and promptly dealing with any issues that arise. Landlord insurance can cover you against damage by the tenant or loss of rent.

What if I can’t get a tenant?
This is a common fear among first time investors but you only need look at the low vacancy rates for rental properties to realise you are unlikely to have trouble finding tenants. Of course nothing turns potential tenants off faster than a run-down, dirty house, so for the greatest tenant appeal ensure the property is in good condition and the rent is on par with other similar properties in the area.

What if now is not the right time to buy?
Many property investors will tell you that 'when' to buy is nowhere near as important as actually 'buying'. With a long term strategy in mind, so long as you take a reasonably cautious approach, a decent property is more than likely going to deliver growth in the long term. The longer you hold off, the more time you spend missing opportunities to enter the market and grow your wealth.

What if I get the wrong advice?
You wouldn't take advice from an unqualified doctor, so don't take property advice from smooth talking sales people. Do your research and triple-check all the fine print before you enter purchasing schemes like rent guarantees and off-the-plan purchases. Remember, if it sounds too good to be true, it probably is!

Book Review

A Short History of Nearly Everything

by Bill Bryson

This book is a quest to understand everything that has happened from the Big Bang to the rise of civilization - how we got from there, being nothing at all, to here, being us.

Bill Bryson's challenge is to take subjects that normally bore the pants off most of us, like geology, chemistry and particle physics, and see if there isn't some way to render them comprehensible to people who have never thought they could be interested in science. It's not so much about what we know, as how we know what we know. How do we know what is in the centre of the earth, or what a black hole is, or where the continents were 600 million years ago? How did anyone ever figure these things out?

Bill Bryson takes us with him on the ultimate eye- opening journey, and reveals the world in a way most of us have never seen it before.

Fix or not?

A drop in fixed rates by a number of banks and lenders has increased the number of borrowers who are fixing their home loans. 

If you decide to do the same, make sure you are fixing for all the right reasons not just the lure of a cheap rate. Be fully informed of the implications of locking into a fixed rate as you don't want to later regret your decision if variable rates drop.
Your financial situation and personal preferences should always be the guiding factors in whether to choose a fixed or variable home loan. Both loan types have their pros and cons so talk to us for the best advice about what product suits your budget and lifestyle.

The insurance of fixing
Choosing a fixed loan is similar to buying an insurance policy; it gives you certainty over a period of time. In the current climate of global economic upheaval, a fixed rate can be a good option if you are on a tight budget because it allows you to know exactly how much each repayment will be. 

On the downside, many fixed loans charge for extra repayments and early payout (break fees). Seek advice before you sign the contract on how the break fees are calculated in case you have to sell or refinance within the set term. The more rates fall, the higher the break cost because the re-financer has to compensate themselves for the loss of re-lending the money at a lower rate.

The ups and downs of variables
Variable loans have more features and greater flexibility than fixed loans but as the rate fluctuates according to various market conditions they can be risky if you’ve overcapitalised on your loan.

If your variable rate falls, you may be making lower repayments than if you had fixed your rate but if the variable rate rises, your monthly repayments increase. When choosing a variable it’s important to plan for the possibility of rate rises and be able to adjust your budget accordingly.

Other options
Split rate and capped loans are hybrids between fixed and variable loans. 

Split rate loans allow you to divide your loan between fixed and variable interest rates, which gives you a foot in both camps.
Capped loans are often offered as honeymoon or introductory loans and under this type of loan the interest rate is fixed for the capped period. During this period, the interest rate cannot go higher but it may go lower if the lender's standard variable interest rate falls below the capped rate.

Technology Trends

Just as the fax machine has been relegated to dinosaur status, so too will email be considered old hat. Analysts predict that 2012 will see technologies become more social, more connected and increasingly voice controlled.
Embracing the rapid movement in technology is not always easy but investing the time and effort to take on a new technology almost always pays dividends. Let’s look at what's in store for us over the coming year.

Voice Command
The success of Siri (a speech-recognition 'personal assistant' that's built into all Apple iPhone 4S smartphones) will prompt this type of technology to be used in other handsets, computer tablets (mobile computers), PCs and on websites.


Email on the Out
The popularity of social networks and messaging products marks the decline in email usage. Downloading services that allow the sharing of links has also proved quicker and more smart-phone-friendly than email. 

App on the Up
App stores will grow in the number of available options as more companies come forward to help free us from content overload. 

Windows 8 - Touch
Windows 8 Touch will bring ‘touch’ into the mainstream PC market, narrowing the gap between notebooks and tablets. Users of Windows 8 devices will be able to tap and swipe their way to touch-based applications via big, touchable panels. 

Social media
Social media will continue to grow and insert itself into even more aspects of daily life, particularly those that are geared to photo and video based interaction. Social networks will add more features and get even more competitive, with Google+ trying to dominate the market.

Mobile capabilities
There will be an increase in mobile phone capabilities in every aspect and a growing number of internet users will demand access to content through mobile devices. Phone hardware and software will become more sophisticated and phone video will continue to improve in quality.

Getting Thinner
Our TVS, PCs and tablets are thin – so too will our laptops become as thin as manufacturers can allow. The emphasis will be on laptops that look great, run quietly, and are easier to carry.

Did you know?

If you apply for a fixed rate loan, the advertised rate offered is current only for that day. By the time your home purchase happens, that rate may no longer be on offer unless you opt for a Rate Lock. Some lenders offer this service automatically, while others require you to pay a fee to put the rate lock in place.

About Us

Patrick is the founding Director of Citiwide, the 1-StopShop convenience for your Loan, Conveyancing and Insurance needs. Citiwide was established in 1988.

With 20 years experience in the industry, Citiwide's team of expert Finance Consultants can confidently find and organise the loan that is best suited to you.

Citiwide is accredited with over 20 banks and lending institutions and the service is totally FREE.

Interested in investing, debt consolitation or just want to discuss your situation? Click here.
Disclaimer: This newsletter is intended to provide general news and information only. Readers should rely on their own enquiries before making any decisions regarding their own interests. Please do not rely on any part of this newsletter as a substitute for specific legal or financial advice. All material is copyright 2012.