Read more… or Read more right here… »

They are warning people looking to invest in property about how crucial it is for them to understand what exactly they are looking at, but I recon anybody who is looking for a house needs to learn how to read the stats, before making the big decision - to buy or not to buy.

So what is the basic mistake people make in their interpretation of statistics? Comparing apples with pears. This would include comparing houses with units or houses with apartments, comparing 2-bedroom houses with 3 bedroom houses, etc.

Many people don’t know the difference between the median house price and the average house price. This is why, when seeing a median price in some suburb drop, people immediately think “It’s bargain hunting time” - when in reality this could have been caused by many cheaper (or perhaps smaller) houses being sold over the same period of time, or even units.

If the median price was calculated using all the prices, of houses as well as of units - people who are not statistics-savvy won’t suspect that the drop was caused by a shift of attention towards units. Which is a very likely scenario, by the way - as prices of houses rise and become less affordable, people begin buying units, because those are still in their price-range.

Also, different researchers calculate things differently, which is why you can see different figures referring to the same periods of time. According to News.com.au the difference in median house prices coming from different sources can be up to $50,000 - a huge deviation, if you ask me.

The closer to the inner city your target suburb is, the more confusing statistics can get, because in the inner city we have a mix of different housing styles - apartments of all sorts (studio, one-bedroom, two-bedroom, three-bedroom), units, houses (two-bedroom, three-bedroom, you name it). This is again a situation where you’d want to compare apples with apples.

So what is your take-away from this post? First, knowledge is power and if you know how the stats are calculated, you can use them safely, and second - question everything, and see if you can come up with a logical explanation of how this happened.

Have you ever been mislead by property statistics?

« Hide it

Subscribe to Homeiown.com - click here

Read more… or Read more right here… »

This has been the explanation for some 30 house fires in NSW, that happened days after a brand new insulation was fitted. These people simply wanted to improve their homes taking advantage of the recently announced government rebate and as a result were almost left homeless.

The worst part is that even smoke alarms weren’t a big help as they weren’t triggered right away. This could be because of the fact that the fire is above them, not below.

Firemen are urging people to climb up and make sure that the downlights are not being smothered by the insulation. I know that we shouldn’t have to - but hey, better safe than sorry!

« Hide it

Subscribe to Homeiown.com - click here

Read more… or Read more right here… »

Why is this a dangerous situation to be in? Well, imagine that you need to sell that house and move elsewhere. You’ll sell it and won’t be able to pay off the mortgage, so you will have no place to live and will still owe the bank money. Not a good place to be.

But how can that situation happen in the first place? I mean banks are not stupid, and they lend you money against your house’s value. They send a trained professional to do property evaluation, to be sure your house is worth more than they lend you.

Here is one scenario: imagine a bubble when houses are way too overpriced. Does that sound familiar? Does it remind you of our current property market? Anyway, when property valuers perform the evaluation, they take into account the features of the house, but they never operate in vacuum - they also take into account prices on property in the neighborhood. This means that when other houses in the same street went up in price for no good reason, other than craziness of people who overpay - the house you’re buying went up in price, too.

So the bank feels it’s safe to lend you the 300K for you to buy a house and you begin to pay off your mortgage. You’re not in a hurry because you’ve got the next 20 years to do it. And then the bubble bursts. Just like it did in the US.

And houses decline in value. And the house you’ve bought isn’t worth 300K any more, it has lost 15% of its value. Or, more accurately, it was overpriced 15% when you bought it and now, after correction has occurred, it’s back to its realistic price. Which still is 15% less than you owe the bank. Which means that if you’ll sell it and every cent you get for it goes to the bank, you will still owe 45,000. Which is about the annual wages worth for many people I know.

This story shouldn’t scare people who have a lot of confidence in their jobs. If loss of income isn’t likely to make you sell the house in then next 2 years, don’t worry about negative equity. If you’re positive there is no reason in the world why you would want to sell and move in the next couple of years - go for it, buy if you want to. If you’re not borrowing 80+ percent of your house, you will survive the fall.

Otherwise… consider yourself warned.

« Hide it

Subscribe to Homeiown.com - click here

Read more… or Read more right here… »

To save water

1. Plant native plants in your garden. They are drought-tolerant and won’t consume as much water as non-native ones.

2. Replace the shower heads to water saving ones. You won’t notice the difference in the shower - but you sure will in the bill.

3. If it leaks, fix it. All the taps, inside and outside your house, all the torn drippers, everything. Do not forget to check for leaking toilets..

To save energy

4. Replace your regular light globes with energy-saving ones. Yes, they cost more, but they last longer and consume much less power so it’s worth it.

5. Replace your lighting fittings with the ones that have a ceiling fan. It will help you save on energy in the summer as well as in the winter.

During the hot months circulating air will make the room feel cooler (as much as 8 degrees cooler!), which consequently can reduce your air conditioning bills by up to 40%.

During the cold months you can run the ceiling fan in a reverse order, to push the hot air from near the ceiling (where it normally gets by laws of physics) down towards the floor. This can reduce your heating bills by 10%.

6. Use rebates available to you to insulate your house for free. It will make it cooler in the summer, warmer in the winter and reduce your bills.

7. If your house has external blinds (most houses do), close them in hot days. Less sun will gets in, the temperature will be lower when you come home and you won’t have to run the aircon as much.

8. Finally, the most obvious (yet most commonly forgotten) tip: turn the lights off when you leave the room. Duh, you say… but if I had a coin for every time my partner had forgotten the light on, for the whole day, with nobody in the house, I would be filthy rich by now

Got any tips of your own to cut the cost of home bills?

« Hide it

Subscribe to Homeiown.com - click here

Read more… or Read more right here… »

What was close, you say? Mortgage stress, that’s what. For the folks who only heard about the mortgage part, but never about the stress part, here the exact definition of a mortgage stress: when people are paying above 30 percent of their income on mortgage repayments, they are under mortgage stress. In basic human language it means that they find it much harder to make the ends meet.

If this article catches you before you made a decision to take a mortgage, good. Because there is something you need to know: Reserve Bank of Australia (RBA) governor Glenn Stevens said that anyone taking on a new mortgage should allow for at least a two percentage-point increase in interest rates. Translation: they are going to increase the rates in the nearest future. To avoid getting into a loan that is too heavy for you, see what your repayments will be if the interest rates raise 2% and then see if that number is still less than 30% of your income.

Of course they won’t raise the interest rates 2% overnight, but it is possible - and even likely - that by the middle of 2010 the rates will rise 1%. I’ve never liked percentages because they can look deceivingly small and insignificant, but if you look at the real numbers - they never lie.

Let’s take the average standard variable mortgage of 270K (according to Australian Bureau of statistics). Let’s assume you’re currently paying 5% interest on that kind of loan over 15 years. Your monthly repayments would be around $2,135. This means that if you are earning anything less than $7116 a month, you’re in a mortgage stress already.

If they raise the interest rates 1%, your monthly repayments will become $2,278. That would mean that to not be in mortgage stress you’ll need to earn over $7593 a month. Do you expect a pay rise of over $5700 in the next 6 months? If you’re not, mortgage stress looks very likely to occur.

You can do this little exercise on any numbers using this helpful calculator here, and my message is loud and clear: please don’t bite more than you can chew, even if the banks let you.

Have you ever experienced a mortgage stress? How did you solve this problem?

« Hide it

Subscribe to Homeiown.com - click here