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While property market as a whole, taken over a long period of time - such as 20 years - may “always” seem to go up, the picture for any particular house in a particular area, in a particular year can be quite different. And when you are buying an investment property - this is exactly what you’re buying. A particular house. In a particular street. In a particular year. That may or may not be a good year / street / property in terms of capital gains. And with negative gearing, when the house doesn’t increase in price, that means losses.

On contrary to a famous myth of property investing, negative gearing is not something that doesn’t cost you a dime, because everything comes off tax money. Any investor that is holding a negatively geared property is paying out of pocket expenses, which can be less or more, depending on his rental return. The rent that your tenants pay only covers so much of the total expenses, and the rest is for the investor to pay. The expenses on property - interest on the loan, maintenance, etc - are tax-deductible, but it only means that instead of paying the whole expense, you are paying a portion of it.

Without getting into calculations, basic common sense suggests that if you are holding an “asset” that loses you money, you must sell it for much more than its original purchase price to get all you’ve lost over the years back, and make some profit. And this can only happen if that particular house goes up in price. And that is a big IF.

Another scenario many property investors prefer not to think about is - what happens if the government decides to drop these tax incentives? If a day comes and they decide that they would actually like all that tax back? That there are enough rental properties on the market and they don’t need to encourage investors to create more?

And one more last thing to consider - even if everything goes according to the plan and you’ve picked a house with a great capital gains potential, but circumstances force you to sell the property before it had a chance to grow in price, guess what - a loss again.

That’s it from me, now let’s hear from you - what is your experience with negative gearing?

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Basically, negative gearing means that you borrow money to buy a property, and the income from the property doesn’t cover your expenses on that property, so instead of making income it makes a loss.

The next logical question is - why would anyone want to make a loss, isn’t investing all about profits? The answer is “capital gains” - the increase in the house value over time. With negative gearing an investor can only make a profit if the house rises in price more than it has lost money until the moment it was sold.

To make negative gearing more attractive there are tax concessions. An investor gets to deduct the losses made on property from his or her income (which could come from any source, not just property) and that way reduce the taxable income, in a way saving money they would have otherwise paid to the government as a tax.

Time for a history lesson: negative gearing was introduced in Australia way back in the early 1980s to increase the supply of rental properties. This way, if more affordable rental houses were available, the government wouldn’t have to fund public housing with all the administrative and infrastructure costs. When the pool of rental properties is larger, the chance that rents will go up is smaller, therefore higher rents won’t drive the inflation up and the economy will be more stable.

But, of course, it’s not all rosy and negative gearing has its dark sides - which I’ll discuss in my next article “What is negative gearing? Part 2″. Stay tuned.

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If this is what you think, too, then there may be a light at the end of the tunnel for us.

I was hoping that rising interest rates will do the trick to bring the demand under control and stop pushing the prices higher and higher, but that alone clearly wasn’t enough. I was waiting for the statistics to kick in, so that after an unbelievable period of strong growth we would see house prices plateau or return to realistic levels, but that just wasn’t happening.

Finally, after 17 months of strong gain, the latest RP Data-Rismark property index has shown a downturn, a 0.7% decline in June. Not much, but that’s all there is - I’ll take it.

However … there is something else that, according to the report from RMIT, may affect house prices - the election. According to the paper, over the past four decades, Melbourne home prices have risen by 1.21 per cent a quarter in the year before a federal election, compared to 0.84 per cent a quarter in the year after. And if we look at it on the state level, there was a 2.3 per cent rise in the year before a Victorian state election, compared to a 0.6 per cent increase in the year after.

Although interest rates are not a big help this month (today RBA made a decision to leave interest rates on 4.5), but perhaps there will be another rise later on this year. So combined together, the predictions based on this study and the anticipation of more interest rates rises are giving me a reason to believe that the next 6 - 12 months could be a good time to buy a house.

Now, what do you think, when is a good time to buy a house?

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Owning a home is an important first step toward financial security. By purchasing a home you are making possibly the biggest investment of your life and paving the way towards a larger net worth and better financial opportunities. That being said, buying a home is also a difficult process that requires one to save a significant amount of money in order to get a good loan. The Australian government has, since 2008, offered citizens an opportunity to make their first home buying process a little easier with the First Home Saver Accounts.

The First Home Saver Accounts are an excellent option to save for your first home purchase because the Australian government actually contributes to your savings. The plan is really fabulous, but not many Australians have taken advantage of it. In order to encourage more of us to use the FHSA the government has made some recent changes to it, including bumping up their contribution. Our government know that a successful economy is built around property ownership. That is why they are working hard and spending money to help Australians buy their first home. Doing it, helps everyone in the long run. It is not a scam, just a better way to save for your first home purchase.

First Home Saver Account 2010

Increased government contribution - The Australian government will now contribute 17 per cent on individual contributions up to the first $5,000 each year. That means if you deposit $5,000 each year for four years the government will add an additional $850 per year to your account for a total of $3,400 in free money.

Overall cap - A cap of $75,000 has been introduced to the FHSA plan. That is plenty of money to buy your first home, especially when a portion of it is from government contributions. Once you meet that cap you will no longer be able to contribute, but you will still be able to collect any government contributions or investment earnings on the account.

Upfront contribution - Savers will no longer have to make a minimum upfront contribution of $1,000 to open the account.

Tax incentives - Earnings from the account will be taxed at 15 per cent. Withdrawals that are used to purchase a first home will be tax free. The government contribution of 17 per cent will not be taxed.

Resident status - In order to open an account you no longer need to be an Australian resident for taxation purposes. This allows those Australians who live overseas to open an account. The difference is that those who live overseas are not eligible for the government contribution, that is only open to Australian residents for taxation purposes.

It is easy to see how these adjustments to the First Home Saver Account can make it more appealing to Australians. These accounts are available to anyone between the ages of 18 and 65 who has never purchased or built a first home in which they live. They must also not have or previously have had a First Home Saver Account. Otherwise all an individual must do is provide their tax file number to an account provider.

Remember that if you open an account and are in fact not eligible to do so you will be penalised. Providers for these accounts are available from public-offer superannuation providers, life insurers, friendly societies, banks, building societies, and credit unions. It is up to an individual to decide from whom they want to open an account.

When a person applies for a First Home Saver Account there is a mandatory fourteen day cooling off period. This gives individuals time to consider all of their options and make certain the account is right for their needs. Once an account holder has withdrawn their money and purchased their first home they are required to live there for six months within twelve months of purchasing or completing construction on the home.

The contributions to these accounts can be made by the account holder or by someone else like an account holder’s employer. All contributions are made from after-tax income. When the Australian government makes a contribution it goes directly into the FHSA after the account holder has sent their tax return and the account provider submits the information to the ATO.

The First Home Saver Account is only accessible after four years. Over those years the account holder must have made a minimum contribution of $1,000 per year. If an account holder is purchasing a home with another account holder, only one of them will have to have met the minimum four year requirement. As long as one person meets the requirement both account holders may withdraw their funds.

Should an a First Home Saver Account holder decide that they no longer want to buy a home they may close the account and contribute all of its’ holding to their superannuation. If one chooses to transfer the balance to their superannuation they may apply for early release of the funds due to severe financial stress, terminal illness, or compassionate grounds. There are applicable penalties for not meeting the withdrawal or occupancy standards.

The First Home Saver Account in Australia is an unprecedented step toward helping Australians buy their first house. The Australian government wants more residents to take advantage of this unique plan so they have made it even better with this year’s changes.

If you are looking down the road toward buying your first home in the next few years there is simply no other savings plan that is going to give you so much in return and be so secure. If you start saving today, you can earn up to $850 per year from the government’s contribution alone. That does not take into account any interest earnings. There is no reason not to take advantage of this plan. Get your finances together and start planning to own your first home today with the First Home Saver Account.

This article was written by Timothy Ng who is a regular personal finance writer and part of the team at Credit Card Finder, a 100% free Australian credit card comparison and application service. Visit the Credit Card Finder website for more information on credit cards.

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According to the latest report from Bankwest, the correct answer is “almost 30, and you can’t do it alone”.

But why? Because the time it takes a young couple (not a single person, but a couple!) to save $85,000 for a deposit (a mere 20% of the median house price) is 4.5 years. Buying a unit won’t be much of a shortcut - you’ll have to spend 4.3 years saving, almost the same time.

Shocking? That would be an understatement.

This calculation implies that a couple should save 20% of their gross income annually, to get there. This means that it will be even a larger proportion of their net income.

Just one year ago, instead of saving 4.5 years, the same couple with the same income had to save up for just 3.7 years. This is the problem with boosted government grants, you see - they blow up the prices out of proportion, and then the grants are reduced to pre-boost levels - but the prices remain ridiculously high.

I don’t really see a way around this situation. Unless house prices return to reasonable levels due to some divine intervention, or unless people are willing to compromise and choose to buy a house in a much less expensive area, it will be necessary save for that long. Not many people will be in a position where they can save more money faster, because it takes at least 2 major, not easily achievable, components - a high wage job and discipline.

Those interested to see areas where they can buy a house quicker should have a look at the maps in the report - the color-coding shows which areas are more affordable then the others. Choosing a more affordable area can halve the time spent saving.

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It is funny how these adjustments to grants and bonuses point at the main goal. What the government would really love to see people doing is showing preference to newly constructed houses (as opposed to the established ones), so they take the 2K bonus that established houses were previously eligible for and give it to the newly constructed homes in metro and regional Victoria, raising the total amount from $11,000 to 13,000. And to encourage people to buy homes in regional Victoria even more - they raise the regional bonus another $2000 - from $4,500 to $6,500.

Another funny little detail that I noticed is that to qualify for the FHOG the property should cost less than 750,000 - when previously it was caped at 600,000. I wonder if this is because the median prices went up 25%(!) last year. What do you think?

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Making an offer prior to auction is a science on its own right. Mainly because you need to work out what price and settlement period would tempt the vendor into giving the auction up, without being a mind reader. You need to time your offer so that it gets accepted, before another buyer comes along and makes a better offer. The reason for this is that once one offer has been made, it will be disclosed by the agents to other potential buyers to try and get them to go higher, transforming the whole process into just another auction. This would be the opposite of what you’ve meant to achieve.

As always, agents are in advantage in any case - if the house sells prior to auction, the buyer has made their job simpler, and if not - they can adjust the vendor bid accordingly so that it’s equal or higher than highest received offer. In fact, at open houses they will encourage people to make offers, to ‘feel the market’ and to have leads to come back to, should the house pass in.

A trick that you can expect them to pull on you is to demand an unconditional offer. Just to be clear, there is no law that says “all offers on houses advertised for auctions must be unconditional”. In many cases agents will have you believe that going unconditional is the only way to get your offer passed on to the vendor - which is not true. They must pass any and every offer, conditional or not, unless the vendor has instructed them to not take anything less than X (and your offer is below), or if the vendor is not open to selling prior to auction at all.

It is true that as it gets closer to the auction, when a vendor compares two offers where one is conditional and the other one is not, the unconditional might win, even if they offer a bit less - just because it’s less risky. But if you are submitting an offer well before the advertised auction (4 weeks for example) and it is conditional on building and pest inspections done within a short period of time (a week), the risk for vendor is not all that big because there’s plenty of time left.

In my opinion, because timing is rather important, it makes sense to offer your best price and terms when making the first or the second offer. If there is a lot of interest, a buyer that is mucking around with the price and offering small increments risks losing to another person who offers a far better price at one go. Also, make it clear to the agent that you won’t be bidding at the auction and set an expiry date on your offer to put the pressure on the vendor. Make your offer expire before they have another open house, to reduce chances that they encourage another buyer to compete against you.

That’s it from me, and now it’s your turn - what are your best tips for making an offer prior to auction?

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Their front page looks very similar to Google, most of it is blank and there is just the search box in the middle. Type the name of the suburb you’re after in it, hit Enter - and there you go, lots of property listings on the left and the map is on the right. Nestoria also displays all the schools, shops, post offices etc on the map - a very handy feature, and of course you have full control over it and the ability to turn it on and off.

I’ve had the pleasure of meeting Kat, the person behind Nestoria blog, and the outcome of this was my interview - read it here. For someone who is mostly focused on the technology, rather than on real estate market, Kat asked me some interesting questions! Take for example this one:

“What would you say are the main problems facing people wanting to buy property in Australia at the moment?”

So if you’re interested to learn some more about Aussie real estate market - and about my take on it - head over to Nestoria blog. Happy reading!

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But sarcastic jokes aside, this new iPhone app by Commonwealth Bank does look promising. It’s based on what they call an “augmented reality technology”, and the way I understand it, it is “augmented” because the app takes the reality - the address of the property you’re standing in front of, when you point and shoot your iPhone camera at it ( via geo-positioning), and then adds to it some information you would need to make your property decision.

That information can be the current property listings in the same area, so you get to see what’s listed for sale, what the price range is and a 5 recently sold houses in the same area, similar to the property you’re standing next to, with sale prices. No longer will your iPhone be a mere camera to take photos at inspections.

It also will have the ability to switch to a bird’s eye view to show all properties matching the search criteria at once, save a house in Favorites, send to a friend and more.

This new app should eliminate the need to open up a website (such as realestate.com.au or domain.com.au), do a search for that specific address, and then begin navigating your way through the other listings in that area. Which basically is a fair bit of work, especially on an iPhone, which (with all due respect) is not as convenient as a computer with a large screen, a mouse and a keyboard. Plus, when you’re inspecting, often you are in a rush to get to the other properties on time and one quick look at the information this app will provide can save you about 5-10 minutes per property - looks like a worthwhile piece of software to check out.

In fact, this app should be just as good as realestate.com.au itself , because Commonwealth partnered with them and with rpdata.com to develop this new digital wonder of technology.

The word from Commonwealth Bank is that this app will become available in June this year, when Apple approves and adds it to the Apple Store - for free download!

And for the iPhone junkies amongst us, who can’t wait, here’s a teaser - click below to watch a short video about this new cool virtual reality iPhone app, or if you’re reading this in your email, click here.

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And here is the undeniable proof: 74% of Australians find inspecting properties stressful! This is according to a survey conducted by Lonergan Research exclusively for realestate.com.au in March 2010.

Wait, this gets even better - realestate.com.au thought the result of this survey was important enough to go and rearrange their whole website, to make it easier to navigate, more intuitive, requiring less thinking and consuming less time, all of that to make the stressed home-buyers happier.

And to tell you the truth, I quite like the outcome. The change wasn’t just made overnight, apparently the whole website was available in BETA since March 2010 and thanks to the beta-testers (real estate agents and consumers) a lot of bugs were fixed and new features were added.

Honestly, the decision to spend just one month in BETA seems kind of brave to me, because every little change takes time to implement and test - but it looks like they made it happen. Inevitably, you will find more stuff that needs fixing, but since we’ve established that realestate.com.au do care about user experience (well, why else would they change the whole website around?), sending your feedback is a worthwhile thing to do.

Let’s make one thing clear - there was no complete makeover, and you will still be able to recognize the website when you log on (so don’t panic!). The website now has a more modern look and feel, search has been given a central position and the ads are less intrusive. In your property search results, apart from the upper banner ad, you won’t meet any more distractions, as the majority of ads sit much lower, closer the bottom of the page. You now have the ability not only to view, but also to compare the properties you’ve selected.

I won’t go into a detailed review of the website now, as I have this planned for later. Let me just say that you have a nice surprise coming, so stay tuned - I am working on it, and your patience will be rewarded soon.

And now, if you have 4 more minutes, have a look at the Breaking News Video, presenting the latest and greatest realestate.com.au and watch a couple of stories of real homebuyers, who used it to their advantage.

Click below to play the video (or go here to watch it on YouTube).

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