As we already half guessed, it has been confirmed that Australia has the world's least affordable housing, as measured by multiple of income, says a new report.

The wonderfully named '6th Annual Demographia International Housing Survery: 2010' cites Vancouver as the least affordable place in the world to buy property, where a typical house sells for 9.3 times the average annual income of the local population. Sydney comes in 2nd (9.1) followed closely by the Sunshine Coast (9.0) and the Gold Coast (8.6).

Melbourne slots in at number 7, Mandurah 14th and Perth 19th.

"Affordable" is deemed to have a median multiple of 3.0 or less, whereas scoring 5.0 or more is seen as "severely unaffordable".

Australia as a country comes in highest at 6.3. OUCH!

The U.S. market, with its downturn in prices over the past few years, has seen its affordability ratio drop to 3.2.

Australia, a relatively small country with far less urban areas than elsewhere, occupies one third of the 60 areas on the planet with "severely unaffordable" housing.

Should we be concerned about this? is this sustainable? an anomaly?

[You can download & read the FULL REPORT (pdf) here]

Guest Blogger, Mr David Airey, President of the Real Estate Institute of Australia and long term aussiehome.com client writes...

The Reserve Bank decision to leave interest rates unchanged today following three consecutive increases is GREAT NEWS for home owners. It's good to see that the RBA are listening to the markets and taking note of the downturn in lending.

The Real Estate Institute of Australia ("REIA") was critical of the RBA decision in December to lift official interest rates for the third time and are pleased to see them now taking a cautious approach.

REIA noted that increased interest rates reflects an improving economy, however another rate rise would have DAMPENED THE MARKET AND THREATENED CONSUMER AND BUSINESS RECOVERY. Four rate rises in as many months would have been too much too soon, especially since we do not yet have the full picture on December quarter economic activity or property sales. The reality of the market is that housing lending has dropped along with business loans and a month with no change is definitely what was needed.

Even more pleasing was to see all the economists and financial writers having to redo their prepared scripts on a rise in rates and the disappointment across their economic faces. I've been critical of those financial writers who actively encourage rate rises and fuel the focus on "price bubbles" and "inflation". I'm not (thank goodness) an economist. I'm a realistic and practical person who not only works at the coal face but I see and speak to estate agents and Australian home owners on a daily basis. I hear them telling me about the subdued market and reduced activity since the 3rd rate rise in December. And I'm starting to hear from an increasing number of first home buyers who are already struggling to meet increased payments.

The reality of the 3 rises plus the extra .25% that the banks added has resulted in an average 1% rise in rates since October. The average variable is around 6.5% still higher than many other countries and business rates – wow! Add 2 or 3 per cent.

What concerns me is the doom sayers who reckon that rates are artificially low. So what? Why do they need to be high? What's wrong with a booming economy and growth and a strong property market and full employment? Maybe these are the reasons I never made it through economics.

Other commentators such as Marcus Padley are worth quoting:

The RBA have surprisingly left rates unchanged at their meeting today.

Main reasons appear to be that:

·         Credit conditions are still "difficult" with businesses still struggling to find credit.

·         Global economic recovery is only "modest".

·         Inflation is not a problem.

·         Commercial banks have lifted rates more than official rates ... doing the work for the RBA.

·         The Chinese are tightening policy.

·         They have yet to see the impact of recent rate rises kick in.

·         Rates are on hold globally.

They do hint that they will raise rates in the future to ensure inflation is kept under wraps.

The suggestion already is that they are moving to a more cautionary stance and may well keep rates on hold now until proven necessary to raise them.

We may see rates on hold for some months. There is also concern that they have got the wobbles about sustained economic growth this year with China tightening a threat to Australian economic growth.

[ Credit for article: DavidAirey.com.au blog]

Newspaper headlines have been flying around recently touting "run away markets", "Perth market hot" and today’s "Perth median price soars over the $500,000 mark". Have we not learned our lesson from the previous boom? The higher the rise, the harder the crash? Is the market running hot, or is this just print media's love for exaggerated headlines to help sell papers?

We thought we would cut straight to the chase, and ask some real estate Principals how they saw it. They are, after all, out there in the field every minute of the day.

Interestingly, rather than perhaps the predictable "it's all great, hurry up and buy/sell with me", we received some very level headed replies…

Chris Shellabear, Principal of Shellabears based in Nedlands, makes the point that "general market comments generally do more harm than good". Indeed, "people must understand that these [property sales] statistics are a bit stale by the time they are touted – there is a time lag.  An Agent 'at the coal face' can give you a far better feel for the market than a Commentator and it is relevant to you as it relates to your Suburb or area."

Agents have indeed seen turnover increase (up from some pretty torrid lows) but this "is not to be confused with price increases". Chris Shellabear predicts a "traditional steady as she goes" property market. "Markets only go HOT when there is excess money supply –  with the events of the last 2 years this is clearly not the case." That said, "certain sections of our market place have been active, the $1-2 million bracket has been very active and, as some shortages there have occurred, recently you have seen a little bit of upward [price] movement.  The confidence created here has also crept upwards and we have seen turnover increase at higher price levels".

Another Chris, Chris Jonker of Nexus Real Estate (who operate 5 offices in the northern suburbs) also predicts "modest but stable growth throughout 2010 …  a return to a normalised market with a 'happy medium' between buyer & seller". Chris sees "good buying opportunities" in oceanfront and riverside locations ("Prices still below what they were 2 years ago"). 'Satellite cities' on the metropolitan fringe with "solid" infrastructure in place are also worth looking at, and investors (as always) should have a "5 to 10 year trend" in mind before investing.

"Overall", says Chris Jonker, "the property market has improved from early 2009, however we are still seeing caution from buyers at the top end, with many 'front row' properties … remaining on the market unsold. There have been 36 properties offered for sale on West Coast Drive in the last 12 months with only 6 selling."

Chris Shellabear agrees: "real estate is a long term commitment and rarely suitable for a short term trade so if you are a short term trading type of person you should look elsewhere for your fun.  This is a market for people doing all the normal things with their property, upsizing, downsizing , retiring “tree changing” etc , or keeping an eye out for that long term investment – I know I am."

We’ll be posting regular comments from our real estate clients in the coming weeks and months, and we’d be interested to hear from anyone who has a view on what they see out there in the property market…

Let me first say that I own no shares in Facebook (more's the pity) and no real axe to grind either way in this tale. I just thought this might be of interest to anyone looking to brand and differentiate themselves effectively, potentially save some advertising dollars (who doesn’t want to do that?) try something new and maybe make themselves look pretty tech savvy in the process. It also has rather obvious real estate advertising implications...

Facebook Ads.

OK, I was initially sceptical of all Web 2.0, self-indulgent bloggers, twits and lamebookers. I’d heard all about alleged 'click frauds' last year (search 'Facebook click fraud' and you get 18 million results).

About a year ago I put up my first Facebook ad. It was easy to do, and I aimed it towards 35-55 year olds who live in Perth and sat back and watched the results.

Now 11 months have ticked over (long enough time to measure results I feel sure), the ad has been served up almost 22 million times (22 million!) to my target audience and it has cost me a tad over $3500 (or $300/month for 2mn views/month on average). I humbly show you the stats (screen shot of my Facebook Advertising account below) and invite you to pore over the numbers.  [Note: $ values are US dollars]

Being a business owner with a limited marketing budget, I have experimented with many things over the years (local papers, radio, billboards, cinema ads, car ads…) but the results of my Facebook advertising have blown me away.  I don’t know anywhere you can get potentially millions of directed ads 'served up' into your local market for this cost. It equates  to an average CPM (cost per thousand views) of 16 cents.

CPM for my various Google ads run at over 10 times that, and I can’t (as easily) send my ads to people on Google as determined by their age nor where they live. Moreover, all Facebook ads include a thumbnail image of my choosing. Google ads are mainly text based.

If you compare Facebook advertising to more traditional advertising (local papers, cineads, billboards and the rest) the latter tend to follow the old media rules of a 'shotgun blast at a target' approach, which is (literally) 'hit or miss' at best and (to stretch a tired metaphor still further) provides less 'bang for the buck'.

As audiences reach for their own divergent media, an advertiser can get lost in the choice, or use that choice to target people directly. I know of an experiment done by Perth-based internet marketing afficionado Peter Fletcher who targeted a Facebook ad to be viewed by ONE specific person. As Peter knew their profile settings, he could send up an ad on to their pages when that person next logged on to Facebook. The ad garnered 7 views and was clicked on once – by that person. You can’t get any more targeted than that! I’ve seen shorter Ad campaigns targeted at filling a seminar room and this has been their only marketing spend (about $50) to fill a room of 100 paying $200 a ticket. (That’s a pretty good ROI). No need for brochures, mail outs, email campaigns. Grab people where they are, and who you want to grab.

Moreover, you can run as many ads as you like, set a daily budget (you never go above it), determine your cost per click, pause and delete the ads whenever you want. You can send ads onto Facebook pages of people living in different cities and countries in different age ranges. Enter your credit card details and it gets billed automatically, with notifications of amount spent. You are in total control, can view the results and adjust your ads and settings whenever you like.

Over 6.6 million Australians are on Facebook. 300 million globally (75 million in the States). 1.6mn over the age of 18 are on Facebook in Sydney, 1.4mn Melbourne, 885,000 in Brisbane, 562,000 in Perth… (To check these stats yourself and research further, go to 'Advertising' in the footer on Facebook and click 'Create an Ad' – under 'Targeting' you can play with the variables).

What surprised me at first is that more people over age 40 are on Facebook  than under age 20. It’s a myth that this thing is for kids. And 90% of Facebook users are active (login more than once a week) and 50% login daily. Often 2 or 3 times a day. Do you think these people are interested in real estate?

A few caveats at this stage. You’ll notice that my ad had 22 million views and 'only' 6000 or so clicks. A pretty poor 'click thru rate' (CTR) you might say (a miserable 0.029%). However, that was deliberate. Being a penny pinching sort of guy I adjusted the settings to maximise possible views (which are free). I was doing it as a branding, differentiation and “getting your name out there” exercise. (You can also set them up to get traffic to your properties, profiles, home page and pay per views if you wish.)

The real estate advertising applications are obvious

- real estate reps can put a photo of themselves, a brief heading and 135 characters of text, and link the ad to their own profile page
- individual properties can be put up (as a normal part of every marketing campaign) linking to their individual pages on the agency’s own sites
- Auction campaigns with standalone web sites or individual pages within sites
- Simple branding ads sending users to your home page, or better yet, some specific landing page (competition, offer, new blog post…)
- Ads linking to your Facebook page to drum up ‘fans’
- Use these ads for recruitment of staff (e.g. you’re looking for a property manager and can using age, interests and possibly gender targeting)
- Setting up these ads as a normal way of doing things could make you look extremely tech savvy with your vendors and other clients

It would seem something to (at least) consider; but if all the above is true (and I have probably missed most of the advantages others can see straight away) is this the future of targeted advertising – if not on Facebook, but on social networking sites in general? What does this mean for traditional media who rely on local advertising?

Facebook.com is already breaking even on this advertising stream. I believe they are going to earn a mint from this, in the same way Google did from Adwords. I have reduced my Adwords spend and moved the money to Facebook. If more and more do the same, what will this mean for Google?

[this blog was originally posted by me on Business2.com.au today]

Take an evening stroll or cruise down Bishop Riley Way, Churchlands, this time of year and you will be amazed at what you see - for every year for the past few years, serial self promoter Kym Illman (CEO of Messages on Hold) has put up a Christmas Lights show that has to be seen (and heard) to be believed.

50,000 LEDs, 6 kms of cable and 176 programmable channels of lighting, all synched to Johnny Mathis's "It's beginning to look a lot like Christmas". My kids sat on his front lawn in wonder. We'd never seen anything like it (well, since we saw his house last year anyway.)

Not to be out done, Kym's neighbour across the road has entered into the spirit too, and every night one of them can be seen outside the houses with luminous gift buckets beseeching passers by to donate to Princess Margaret Hospital. All kids get a lolly, and the night we went Kym was there, in his element, head mike firmly strapped on, politely relieving people of their spare cash as he thanked them live on his own FM radio feed which was blaring out down the street. Last year, $22,000 was raised - this year the goal is $30,000. With 300 cars passing by a night, I feel Kym and neighbour are going to reach their target.

Good on you say I - and if anyone in Perth who wants to drive out to his place in the land of the Churches, take your wallet, donate to a worthy cause and marvel at the scene.

[ CLICK HERE to watch Youtube Video of the lights in action ]

Merry Christmas everybody, and a Happy New Year to you all...

UPDATE (New Year) - I attended Kym's display on Christmas Eve - must have been 300 people there, and at 9pm he emerged dressed as Santa from his chimney to dance to 'We are Australian'. Excellent job Kym - did you raise the $30k though?

NOTICE - from 2010 onwards, all comments to our blog are posted LIVE (but we do reserve the right to delete any inappropriate or spamming comments)

The newspapers and blogosphere has been alive with the news of the recent record price achieved for a property in Australia, with the sale of 43 Saunders Street, Mosman Park, for A$57.5 million.

I remember walking round the property a few years ago when it was first put on the market (for a rumoured $80mn) as we developed the individual property web site for the real estate agent, William Porteous. Everything about it was absolutely breathtaking - the views, the sheer physical size and presence, the tennis court, the multi layered levels and finishes throughout.

With the resource riches in this State, it might not be a surprise that at the very top end, WA more than holds its own and now claims the record for the most expensive property in the land.

What does this mean for the rest of us? Probably not much; some might decry the multi-squillion riches in the hands of the few, others might be proud that WA now holds the record; others might have minimal passing interest and a shrug of the shoulders for what has happened ... although I know that those involved in this sale put in the hours (years) and reaped the rewards, and to them, we say congratulations. Records are meant to be broken, and this is one amazing record.

OK - granted I'm no real estate expert, but what's going on in the current real estate market ... in Perth? in Australia?

In 2006 we witnessed a generational run up in property prices (46% growth across Perth metro), and a tightening of the market with record low numbers of properties available for sale. Anything that listed for sale sold in hours, agents has weekends off with nothing to 'open' and up, up, up went the prices. People said it couldn't last... and they were right (eventually), but prices went up another 16% in 2007.

In 2008, it all got rather nasty (I suppose it had to - the higher the rise, the harder the fall?). The property market  - certainly in the higher end of Perth - went dead. In some suburbs hardly a whisper of a sale went by, month after excruciating month. The world endured an unprecedented global financial crisis ("GFC"), which sorely affected those economies with relatively large financial sectors (UK, Iceland, USA); but in some ways, Australia - although experiencing a slower time of it - was isolated from the real nasties.

While this was going on (most of 2008 and early 2009), sellers either took their properties off the market or dropped their prices; and new sellers came in with more realistically-priced homes. Everyone started to realise that 2006 was over, it was a different market altogether.

As the world started to realise that maybe the worst of the GFC was over (all it took was enough people to think the worst was behind us and this feeling to spread), so confidence started returning to the market (sometime after March 2009) and with prices having adjusted downwards 20% or so, sales reappeared. Real estate agents pretty much sold all their remaining stock of properties during the 3 months of August - October 2009. The total number of listings fell and the market tightened again.

Which brings us to today, with (the 'other news' apart from ETS and the Libs) the Federal Reserve just having risen interest rates for the 3rd consecutive month (which is unprecedented by the way, the 2nd time I've used that word in this blog post... another record). Are we heading for another trip? A double dip recession? Did we get overly exuberant about the recovery? Do we need dampening down? Or are we going to learn from history and slowly rise out of the current market situation? Or are we OK?

What is happening? ...

In our latest aussiehome.com TV show episode (which we've converted into our first ever video blog), we interview local Perth home building icon Dale Alcock, Phil talks about whether you should have a financial advisor on your path to real estate success, we then hear from the President of the Real Estate Institute of Australia, David Airey, and then discuss the settlement process and end up in the neighbouring suburbs of Claremont and Nedlands.

Property Prices are on the move and, reviewing the recent media attention, interest rate rises appear to be heading our way soon and the banks are lining up with new products to secure your business.
 
" BankWest Mortgage Could Spark Price War.  A NEW price war is set to erupt across Australia’s $860 billion home lending market, with Commonwealth Bank owned – BankWest to launch a new mortgage product that will have an interest rate cap until late 2012." The Australian, September 2009
 
So the question that is on the mind of many investors appears to be...“To Fix or Not To Fix?”
 
This doesn’t have to be a tough decision; this exclusive Mortgage Bite is here to help you through the mortgage maze.
 
Do you:
        Want predictable repayments?
        Foresee major changes to your family arrangements, job or business?
        Believe rates will rise in the near future?
        Fully understand exit penalty costs with early repayment?
 
If you answered YES to most or all of these questions, a fixed rate loan may suit. It could be time to lock it in now.
 
Why should you choose a fixed rate loan?

        It will help you budget to manage your cash flow, stress free.
        You’re looking for certainty in your monthly loan repayments to the bank.
        Property owners who have a number of financial responsibilities can feel secure knowing that their repayments will be consistent, and that their interest rate is protected from further increases during the term of the fixed period.

Is a variable loan is the way to go?
 
        You will benefit if the interest rates increase.
        Minimal exit costs on early repayment (check with your lender).
 
A Variable housing loan gives flexibility.  Any surplus cash each month can help to pay the loan off faster.  Extra repayments made to the loan can also be redrawn should the funds be required elsewhere.

To Fix or Not To Fix - what would your answer be at this moment?

Most expert pundits would say even Blind Freddy could have seen that interest rates were bound to rise when the RBA met today and although a rate rise of just 0.25% is pretty small, leaving the new rate at 3.25% which is still extremely low, a rise is still a rise.

It hasn't taken long for some in the real estate industry to warn that now would be a good time to buy as a rate rise could see prices increase but is this a real concern?

With Spring in the air as we enter the traditional real estate selling season coupled with the announcement of the recent natural resource contracts and the general belief Australia is moving out of the GFC, Blind Freddy could have a go at predicting the WA Real Estate Market is going to continue to firm up as we move toward the end of the year and he would most probably be on a winner here to. Some believe it already has. Maybe the RBA concur.

There may be any number of good reasons to buy real estate now but the fear of a price rise due to a 0.25% interest rate rise? Well, you tell us...