Purchasing

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GUEST OBSERVER
The Westpac–Melbourne Institute Consumer Sentiment Index rose by 7.8% in August from 92.2 in July to 99.5 in August. 
This is a very surprising result. Movements of the Index of this magnitude are unusual and generally associated with highly significant events such as interest rate moves or Commonwealth Budgets. There is no comparable event they may have triggered this response although the solution may lie with international issues and housing.
Last month we conjectured that the main reason behind the 3.3% fall in the Index related to concerns around global issues associated with Greece and the Chinese equity market. That fall had followed a fall in June of 7.1% (also influenced by concerns around Europe in particular) from the big increase in May (8.0% jump) which was most likely associated with the Reserve Bank’s rate cut in early May and a positive response to the Commonwealth Budget.
It seems that with the tensions in Greece and the Chinese equity market no longer dominating the media consumers are feeling more relaxed. However, the Index remains below 100 and is therefore the 16th reading out of the last 18 where the Index has been below 100 indicating that pessimists have consistently outnumbered optimists.
Ongoing positive news around house prices may also have buoyed confidence. Certainly there was a much larger lift in the confidence levels of those respondents who wholly own a property (up 6.2%) or who hold a mortgage (up 11.0%) than those who are out of the housing market (up 4.3%).
 
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However confidence is not being boosted by the expectation of more interest rate relief. In our special question around the outlook for mortgage rates 55% of respondents expect mortgage rates to rise over the next 12 months; 35% expect rates to be steady; and 5% expect further rate cuts (5% with no opinion)
Over that 18 month period there have been two months (following the RBA’s rate cuts in February and May) when Confidence has rallied but this has not proved to be sustained.
I expect that this current “rally” will equally prove to be unsustainable particularly given a resurgence of concerns around China and the evidence last week that the unemployment rate lifted to 6.3%.
The rise in the overall Index was associated with a modest improvement in respondents’ confidence around the labour market. The Westpac Melbourne Institute Index of Unemployment Expectations fell by 2.1% following a 1.3% fall in July (a lower level indicates that respondents are more confident with the labour market outlook). However the Index is still above the level in May and 6% above the level in October 2011 immediately before the Reserve Bank began its easing cycle.
Not surprisingly, all components of the Index increased. Possibly reflecting the house price theme we saw a huge lift in “family finances compared to a year ago” of 15.5% while “family finances over the next 12 months” rose by 3.9%.
Prospects for the economy, possibly influenced by a more settled global outlook, also lifted. “Economic conditions over the next 12 months” rose by 13.4% and “economic conditions over the next five years” was up by 5.8%. However note that these two components are still down on a year ago: –8.7% and –2.1% respectively.
“Whether now is a good time to buy a major household item” rose by 3.7% but is also still down 1.6% on last year.
Sentiment towards housing improved. “Whether now is a good time to purchase a dwelling” increased by 8.2%. But that really only represents a recovery from the precipitous fall last month of 15.4%. The level in August is still 8.5% below the level in June and still represents the second lowest print for this Index since November 2010 – the aftermath of the Reserve Bank’s rate hike cycle. There was only one state, New South Wales, where the Index fell further (– 3.3%) from the July level. The Index for New South Wales is now 22% below its level two months ago. This sentiment is probably being driven by concerns around both affordability and prospects for prices.
Respondents were less confident about the outlook for house prices. The Westpac–Melbourne Institute Index of House Price Expectations fell by 5.6% (to 137.7) from its level in July (145.8) and is now down by 10.3% over the year. 
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BILL EVANS is chief economist of <a href="https://www.westpac.com.au/" target="_blank">Westpac</a>.
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jchancellor-FAypfDUnLy

August consumer sentiment index rise surprising: Bill Evans

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Getting the signature on the property sales contract is the major focus of estate agents.
They and their vendors have only ever had peripheral interest in the money trail, and even less regard for the buyer's country of origin.
Some agents suggest under the Privacy Act they actually have no authority to ask for such details of a prospective purchaser.
And honest buyers are often shy in being forthcoming, while others simply set out to be outright deceptive.
But the civil fines estate agents soon face under proposed Federal Government legislation will change some of that disregard.
Foreigners are barred by law from buying established residential property unless they are temporary residents, and in that case, must sell when they leave the country. 
But illegal residential property sales and retention have been inevitable - and mostly under the radar - under the current negligible enforcement system, the Foreign Investment Review Board chairman Brian Wilson recently admitted, saying a national register for property transactions was needed.
Be it a $265,000 illegal purchase, as identified by Treasurer Joe Hockey, or the recently sold $39 million Point Piper trophy home.
Some are bought by overseas buyers whose children typically call the vast mansion their home while studying, but more often these home are just left empty, much to the neighbourhood's consternation.
Keeping track won't ever be easy as there are about 11 million residential dwellings in Australia, and about 600,000 property transfers every year.
Soon estate agents and and perhaps more significantly, solicitors will be at the frontline of surveillance.
Rather than turn a blind eye, they will incur fines in the face of illegality.
Not all estate agents will be worse off.
After-all the new penalties regime includes stronger re-sale powers - even capturing any capital gain made - which means another estate agent is set for the ensuing extra commission. 
This article first appeared in the Daily Telegraph. 
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Estate agents will soon be on frontline of FIRB surveillance

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I grew up in a household which held more ‘traditional’ and certainly outdated values. My mother particularly, believed that education was wasted on women and that our purpose was best served by being ‘barefoot and pregnant’ as soon as possible. 
This experience only made me more determined to secure an education and build a solid financial foundation for myself which led me to establish a system which helped me to purchase my first home when I was 21. By the time I turned 30, I had managed to buy 4 more houses which I did independently and all without the need to skip avocado on toast! Sorry Bernard! 
There are a few crucial elements to the ‘set and forget’ system I established which enabled me to still maintain a reasonable lifestyle without, as millennials now say, FOMO. The below system is one I’d recommend for first timers thinking about entering the property market but feel overwhelmed by the daunting task of saving the initial deposit. 
Here are my tips to save for your first home while still being able to indulge in your favourite brunch a couple of times per week!  
Set a goal
I’m a naturally task focused person so operate best when I have something to work towards. I set a goal when I was 18 to buy my first place by the time I was 25 which gave me 7 years to save the house deposit. I wrote the goal and the approximate deposit amount on a piece of A4 paper and put it somewhere I’d see it regularly.
Research
I had chosen Armadale as my ‘suburb of choice’ and chose to do a lot of ‘in person research’ which heightened my emotional attachment to the area. My ‘research’ consisted of me driving up and down the streets, attending random auctions and poring over the real estate section of the newspaper every weekend. This also proved useful as I learnt about the area before making a massive financial commitment so I was able to ascertain if the fantasy would live up to the reality. 
Budget Budget Budget!
While budgeting is not fun, it is necessary and being diligent is key. I calculated my ongoing expenses such as rent, utilities, food, university fees and textbooks, petrol, gym and medical costs. I assessed what I absolutely couldn’t live without and what I could. I cancelled my gym membership, started shopping at markets, started taking public transport and increased the number of shifts I was working around my university classes. This also allowed me to gain clarity on whether I could practically afford to buy in this suburb before overcommitting to a mortgage I couldn’t reasonably afford.   
Systemise the banking process
Being a university student, I didn’t always have a clear idea of the incomings or more importantly, outgoings of my bank account. I would often spend frivolously without really considering if it was something I absolutely needed. For this reason, I knew I had to establish a banking system which I could ‘set and forget’ and this ended up being pivotal to my success. 
I set up a system of bank accounts which included a savings account (for my deposit), a spendings account, a rent and bills account and an account which my pay would go into which gave me four in total. I was paid on the same day each week so I set up automatic transfers from my main account to the other three on payday, based on my budget allocations. This meant I could only spend the money I had in my ‘spendings’ account while the rest was allocated for rent, bills, university, petrol and most importantly, my deposit. Trust me, if you set up an automatic direct deposit into a savings account and don’t touch it, it starts to add up very quickly! 
By following this system, I was able to buy my first house in Armadale when I was 21. I had five by the time I was 30 purely because I kept to the system and didn’t deviate. Yes I had to make some sacrifices and miss out on big ticket items such as holidays, big nights out and new clothes, but for me, the goal of securing my financial independence, was worth it. 
Anna Thomas is the chief operating officer and <a href="https://www.propertyobserver.com.au/https://www.stockdaleleggo.com.au/agent/529" target="_blank">Stockdale &amp; Leggo</a>.
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