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Further to our recent report of the NSW tax hikes to hit the property industry, now it’s been revealed that Queensland Premier Anna Bligh plans to impose a special tax on landholdings worth more than $5 million.

Under the property tax surcharge, part of a series of measures introduced as the QLD Government attempts to plug a $4.3 billon hole in the state’s budget over the next four years, landholders who own parcels of land will pay a 0.5% surcharge from 2009-10.

Sure to hit property developers hard at a time when the industry can least afford it, the decision will also likely cost 3500 jobs. It is important to recognize that the property sector employs one in seven workers in Queensland.

On top of the property tax surcharge, the Bligh Government has also raised vehicle registration costs by an average of 6.5% and delayed the abolition of transfer duty on core business assets by 18 months.

Whilst we are in no way suggesting that the Queensland Government shares similar brain cell(s) or genes than the hapless NSW government, what is concerning is the tendency of Australia’s fiscal “experts”, it would appear, to resort to anything but measures that stimulate and encourage innovation businesses and in turn the economy. Surely reducing land tax – a policy long championed by Australia’s real estate industry – would be a better option to stimulate the sector and economy.

Michael Marquette, Co-President of Marquette Turner Luxury Homes, states “Are the states tightening their belts, penalizing businesses and therefore consumers with the hope that the Federal Government will deal with the aftermath? Whatever it is, the economic credentials of those that run our States and Territories should be seriously scrutinized.”

Isn’t the relative basket case that is NSW – Australia’s most populous State – a good enough example of what not to do?

Simon Turner

FYI: Read related articles on the Economy; or the NSW State Government; or the real estate industry

The world’s most expensive location for prime real estate behind Monaco, Central London has seen luxury home values fall for an eighth month. Such locales include Mayfair, St John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and the South Bank neighborhoods of London.

As recently reported by Bloomberg, in November the approximate average value of a house or apartment in the city’s nine most expensive neighborhoods fell 3.6 percent from October, according to an index compiled by Knight Frank. This represents the second largest drop since the index started in 1976. Furthermore, the figures show that property values declined 14 percent since the previous year.

Why is this? Quite simply, vendors are not holding out for emotional prices and are accepting that price reductions have to occur for a sale to be achieved.

Prime Central London real estate has taken longer to register declines seen elsewhere in London because of a standoff between sellers and buyers over price. That ended in September, when the bankruptcy of Lehman Brothers Holdings Inc. caused demand to collapse from those employed in financial services, traditionally the mainstay of demand for expensive homes.

Unsurprisingly, the worst banking crisis seen since the First World War has translated into job cuts and reduced bonuses, and in London it’s likely to get worse before it gets better, with as many as 62,000 finance-related jobs forecast to be lost in London by the end of next year.

Interestingly, the properties least affected by the fall in values are those worth more than five million pounds. With the pound sliding it becomes more attractive to wealthy overseas buyers (yes, they still exist) and given the uniqueness of many of the properties in this category, and how infrequently they come onto the market, they still are highly sought after.

Appreciating that for a buyer with US Dollars, a 15 percent property valuation drop equates to a 35 percent slide when exchange rates are taken into consideration, property in excess of five million pounds is great buying.

Simon Turner

FYI: Read more articles on Luxury Homes; or London; or Credit Crunch

Here are the auction clearance rates for Australian capital cities, for the weekend ending Nov 09, 2008.Source: RP Data

FYI: See more articles on Auction Clearance Rates, Real Estate and The Auction Strategy

With both the United States’ Senate and House of Representatives having approved the $700 billion bailout of the US economy, and President George W Bush having signed the act into law quicker than you could blink, now begins the blame game to see how this crisis snuck up upon so many.

I, however, thought I’d first look at the scale of the figure and try to put it into perspective. From then on, you can judge for yourself this daunting amount.

Here we go:

If you were paid $1 per second, it would take you 22,197 years to amass $700 billion dollars in your piggy bank.

If you took 700 billion steps, you would stop walking in 10,318 years.

It is the combined Gross Domestic Product (GDP) of Thailand and Belgium, according to the International Monetary Fund’s (IMF) 2007 accounts.

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20 under-five year olds die every minute in the world from preventable diseases, which is 30,000 per day when the vaccinations to save them cost less than $1 (I invite you to read our article on Kiva to find out how you can help save lives, one loan at a time).

Apple has sold 150 million iPods: this is 550 million too few for 700 billion songs.

How many ways can you put the gravity of $700 billion in perspective?

Simon Turner

FYI: You can also read this article as a press release

The global market’s erratic performance over the last week has certainly called into question the financial strategies of many (including, it could be said, of the hapless President George W Bush). Regardless of whether one agrees or not in principle or practice with the Federal bailout in the United States, we should at least begin to see a little more stability.

That’s not to say that all will be bright from hereon in. The market crunch, or more specifically the credit crunch, has seeped into all nations and has affected all manner of finances, including Australia. Confidence has definitely been damaged.

The simple fact is that Australian property prices cannot help but be affected given the high levels of debt in Australian households, and our relatively high interest rates as a ratio of household debt to GDP compared to the US.

Even should interest rates be cut further in Australia, as they likely will, we are simply likely to feel an ease of the stress of mortgage pressure rather than an immediate flock to property: the credit crunch has reduced the amount of credit available, and many people have more than enough debt to suggest they’ll have a proclivity to take on more.

The Land of Opportunity

These are also the times of opportunity. With confidence dented all around and property prices sluggish and unlikely to head in any northerly direction for even close to the next 18 months, there are many good buys on the market now, and many that will come onto the market.

Those buyers that are willing to take a long-term view on property values – as one always should (the “quick-buck strategy” is never one that is risk-free) – as well as applying sensible purchasing decisions based on the amount they can borrow with a comfortable buffer in addition to intrinsic good value – will in a few years be looking back upon these times with great satisfaction.

Not panicking during an alleged crisis, taking smart, confident and unemotional decisions, and investing wisely will mean that property – right now and in future – is logical and rewarding as one can hope to find.

What Will Happen Next?

Expect an interest rate cut by the Reserve Bank next week and more in the following 12 months. Expect housing demand in Australia to remain relatively buoyant given our growing population. Expect an easing Australian economy (together with more manageable inflation) due to weakening demand from China, whose economy is heavily hinged on US demand.

Quite simply, so long as share market’s are unappealing, property investment will remain ever the attractive option.

With the average value of homes in Australia having increased by approximately 150 per cent since the millennium began, this well earned increase will generally be retained, and further goes to highlight the intrinsic opportunity that wise, long-term property investment provides.

Simon Turner

IMPORTANT: If you are finding it difficult to cope financially, read our article on Coping with Financial Stress

After the comments both Simon Turner and myself made earlier in the week both predicting and welcoming the Reserve Bank of Australia’s cut to interest rates by 25 basis points, I have received many thoughts from vendors, buyers, agents and other consumers all agreeing that such respite is indeed welcoming.

One response, however, stuck out. A suburban agent who shall remain nameless, in an exceptionally long email to me stated that the cut would make “no difference” to any Australian.

I do not wish to get into a pointless to-and-fro match with someone with whom I will not add credibility to his opinion which was clearly just a cheap attempt at scoring a few visits to his blog, and is ultimately not in touch with reality, but I do wish to reaffirm the positive effects that the RBA’s decision will bring and make clear that negative naysaying is lazy, un-inspiring, and of no help to Australian’s that simply are looking to get-ahead and make ends meet.

The facts are clear – a cut to the interest rate of a home loan of course makes a difference. The major banks had already passed on a quarter of a per cent to fixed rate home loans in the last fortnight, and indeed equaled the RBA’s cut this week, with St George cutting theirs by 30 base points.

Based on a 25-year loan on a new rate of 8.65 per cent, mortgage holders will make the following savings:

Loan Amount Monthly Saving

$200,000 $33.99

$300,000 $50.00

$400,000 $67.99

$500,000 $84.99

$600,000 $101.99

$700,000 $118.99

$800,000 $135.99

A saving is a saving, and more will be welcomed to relieve mortgage stress.  I’m sure an increase by 25 basis points rather than a cut would have made a huge difference to many hip-pockets.  Enough said!

From a global perspective, Australia is looking in pretty good shape. Australian households have cut their spending for the first time since the country was last in recession, whilst business investment has continued. Furthermore, all Australian State and Territory economies have grown, with the added exception of New South Wales (which probably says about as much as the state of Morris Iemma’s hapless government).

We’re not out of the woods yet, but Spring is here and it’s a breath of fresh air!

Michael Marquette

Marquette Turner’s real estate radar® hones-in on property news to keep your finger on the pulse, and with interest rate cuts on the cards, our news couldn’t be more timely!

A report conducted by the Real Estate Institute of Australia in June 2008 has showed that housing affordability has fallen across every Australian State and Territory for the first time since March 2004.

The figures, which consider both rental and home loan affordability, shows that:

  • New South Wales as the least affordable Australian State in which to own a home
  • Home loan holders in New South Wales are having to use 42.6% of their income to meet payments
  • The average monthly loan repayment has risen 7.5% in the last quarter to $2301.
  • Tenant’s have had to face tightening vacancy rates
  • Tenant’s are having to use 25% of their income (up 0.3% from the final quarter) to meet their rental payments.
  • Tasmania is the least affordable State in which to rent, with 29.2% of the median family income having to be used to pay the rent.

What Next?

After nine months lows in the housing market, there are signs that the Australian mood is settling.

Housing Industry Association data shows that:

  • New home sales rebounded by 4% in June
  • Unit sales increased by 15.5%.
  • Detached house sales increased by 2.6%

Whilst auction clearance rates remain jittery, Marquette Turner Luxury Homes continues to maintain that the choice of auction’s when selling property at this time is more of a gamble than it is a strategy. In terms of consumer interest in real estate, however, we have noticed a jump in the level of inquiries in the last week or so.

Looking ahead for the rest of the year, a typically more effervescent period for property sales anyway, a combination of easing inflationary pressures and interest rate cuts should certainly put a spring in the step of many Australians.

Simon Turner

The Reserve Bank of Australia will hold what could be a historic meeting tomorrow, Tuesday 2 September 2008. Should they decide to lower interest rates, it will be the first time in seven years that the cash rate has fallen after 12 successive rate rises.

Most economists are suggesting there will be a cut by 25 basis points, however, the most bullish are even suggesting 50 basis points for the current cash rate of 7.25%.

This will come as a welcome sigh of relief, and indeed follows the trend of Australia’s mortgage lenders who have in the last few weeks been cutting their fixed rate loans.

The Convenient Truth

So why is this? Without getting too analytical, there are many factors that are leading to such a situation:

Global conditions have snuck up upon the Australian economy probably a little more readily than the RBA expected, which will allow it to loosen its grip on monetary policy somewhat: cutting interest rates therefore mitigates the impact of a deteriorating global economy.

Simon Turner

For the week ending 17 August 2008.

Source: RP Data

Property owners are choosing to list earlier this year in the run up to Spring.  Many are searching for answers after being on the market for months without success and others are hurting under the pressure of high interest rates and the ever increasing cost of living.

The decrease in the value of the Australian dollar seems to have caught many experts by surprise. Our dependence on imported oil places us in an interesting position. Further drops in the value of the Australian dollar, coupled with an increase in oil prices would put enormous pressure on inflation. It appears, however, that our prayers for interest rate relief are about to be answered but only by a quarter of one percent (25 basis points).

The long term forecast appears good with some Banks already cutting fixed term rates which should give buyers some much needed confidence in choosing a home

It appears that our economy is slowing enough to see rates come down even further with signs that the commodity boom may have reached its peak. I believe we can look forward to improved market conditions and increased competition for property in the near future with bricks and mortar becoming the asset class of choice with some excellent buys throughout the country.

Michael Marquette

Are you considering a sea change or thinking about which suburbs are in most demand in Newcastle? If you are this information is essential reading. Earlier in the week I wrote about the massive 85% drop in sales in July this year compared to the same month last year for property in the City of Newcastle.

If the trend continues many real estate agencies will close their doors and many agents will be forced to flee the industry. This staggering decrease in demand has put enormous pressure on pricing in the area and is causing many vendors considerable grief. So the question of where to buy to best protect your investment is more important than ever.

In Sydney we have seen suburbs close to beaches and the Harbour hold their price the best. The outer suburbs, especially in the West have struggled and have significantly dropped in value. It really shows that as demand drops in an area price follows in the same direction.

In Newcastle the Blue Ribbon suburbs of Merewether, Bar Beach, Cooks Hill and The Hill have all suffered from interest rate increases and decreased buyer demand but nowhere near to the extent of rest of the City. Year to date sales in those suburbs are down 32% on the same period last year – not the massive reduction seen in the City as a whole.

These suburbs enjoy close proximity to beaches, Newcastle Harbour, cafes, restaurants and many enjoy spectacular coastal views. Purchasing a home is all about location and the choice of suburb is crucial in protecting your valuable asset. This formula is true for all coastal cities and will help put you in the safest position.

Michael Marquette

Marquette Turner Luxury Homes

The media is continuing to report further economic doom and gloom with Australian Property Monitors telling home owners to brace for a 10% reduction in property values over the next 12 months.

With inflation at 5.9% and Australian banks writing off hundreds of millions of dollars the prospect of a reduction in interest rates anytime soon is slim. Even if the Reserve Bank reduces official rates this month the Banks are under enormous pressure from shareholders to make up lost profits and ensure adequate dividends. This pressure has one certain outcome – the Banks will keep rates high – regardless of official rate announcements.

With consumer confidence heading downward and business investment decreasing the scene is set for tough times. Cash is “King” and those willing and able to capitalize on the misfortune of those needing to sell are set to have a bonanza. The Luxury market is feeling the pinch – high end rental properties are sitting idle and the decision to spend money is being taken very seriously by both buyers and tenants alike. The negotiation skills of real estate agents are being put to the test!

Michael Marquette

A symptom of “financial stress” is the inability to raise a moderate sum of money to deal with an emergency of the kind created by the need to pay an unexpected bill.   The actual emotional turmoil in reality is often far less clear cut.

Over the past decade we have been encouraged to spend rather than save, enticed with low interest (for a few months!) credit cards in an era when cash is uncool. Wealth not leading to happiness is generally acknowledged by all but has been paid lip service to by many.

Now things feel less certain, our spending has caught up with us, and the real perils of exuberant credit are becoming all too clear. Maybe the price we paid for assets was way beyond their current value in the face of the basic costs of living that are unnervingly rising.

The Downward Spiral?

Financial stress is common during tough times, and isn’t simply reserved for those forced into frugality because of a lost job, divorce, death, or being over your head in debt, etc. The pressure of financial stress can lead to feelings of insecurity, fear, anxiety, anger, and of course, depression.

These feelings can inevitably have the knock-on effect of encouraging poorer money management decisions. These poor decisions simply add to the downward spiral whereby one takes on even greater debt, and start a vicious cycle of fear, anxiety, and panic that never seems to end.

Reality Check

If you recognize any of the above traits in yourself, you are not alone and there’s no time like the present to get help.

 

Speak with a friend, your doctor, a colleague, a debt counselor, or anyone whose opinion you trust and advise you value. The most important thing of course is that doing something is a sure fire better thing than doing nothing. When you have problems, be they financial, family, legal, whatever, it usually doesn’t take very long for you to realise who really cares about you.

These people will be the ones who support you in your time of need, offer encouragement, and lend an ear so you can just talk.

And on the flip side, if you believe someone close to you is exhibiting any of the signs just mentioned, reach your hand out for them.

 

The Good News

Quite simply, the good news is that there is some good news: you do not have to wait until hopelessness and helplessness are overwhelming.

If you can spare a moment to sit down, face some hard truths with the perspective they deserve, you are halfway there already: evidence clearly shows that those who document their situation, examine their true lifestyle requirements and establish where they want to head in the future, will ultimately act and begin to move in a positive direction by making informed choices.

With just a little guidance, perseverance and commitment, regardless of how long the haul and the nasty little surprises that will inevitably pop up, don’t lose the assurance that you are certainly on the right road.

 

Quite simply, believe in yourself: you can do what needs to be done and come out of what may initially appear as dire circumstances with a new outlook, new skills, and best of all, a new feeling of self-esteem.

First Thing’s First: Set Priorities

The health of you and your loved ones is always the number one priority. Don’t lose sight of this. And, simply by looking after yourself, you are taking care of a job that otherwise would inevitably fall on your loved ones. By taking this approach, everyone is focused and you set an amazing example to everyone around you. It is surprising how comforting this basic knowledge is.

The Next Steps

 

Now, prepare yourself: think of circumstances you have faced in the past, and potential future ones that could pop up.

Make the decision now to learn how to cope, to make the changes you can and must, to stay focused and goal-oriented, and to let anxiety and financial stress fade away as they are ultimately emotions that, whilst understandable, only complicate the actual situation.

 

Put simply, “shoulda, coulda, woulda’s” add no value to your situation. As the saying goes “accept the things you cannot change, recognise the things that you can change, and embrace the wisdom to know the difference.”

 

Balance and Perspective

The Marquette Turner team and indeed myself are certainly not financial or emotional counsellors, but we know one or two things about the issues I’ve just spoken about.

Depression is a medical condition and is something that is treatable and is slowly losing the unwarranted stigma thanks to work by Australian organisations such as Beyond Blue. Have a quick look at their website: it may prove to be an extremely rewarding first step.

Good luck, and remember that you’re not alone and there’s plenty of help, hope and opportunity.

Simon Turner

Marquette Turner is one of 12 Australian companies, along with Qantas, IBM and Commonwealth Bank, that officially and publically recognize the right of equal opportunity in the workplace to extend to marriage equality.

By being part of the Australian Marriage Equality, we along with a handful of other upright Australian companies confirm that we grant full recognition to any marriage, regardless of race, colour, creed or sex, and employ and work with customers with such sightedness.

In doing so and recognizing that all people should be treated with dignity and respect, we invite you to take a moment to visit the site of AME without judgment or opinion cast.

Simon Turner

The Commonwealth Bank increased its interest rates this week, thus becoming the third of Australia’s banks to do so.

The cost of a standard variable home loan offered by the CBA will rise with immediate effect by 0.14% to 9.58%.

The Commonwealth Bank’s move comes after St George and BankWest raised rates on their standard variable home rates, but ANZ, NAB and Westpac have still to make their move.

The Reserve Bank of Australia kept the official cash rate on hold at 7.25% at its meeting earlier this month having increased its cash rate by 50 basis points since the beginning of 2008, in an effort to cool the economy from inflationary pressures.

Australian banks have thus far added between 40 and 60 additional basis points to cover the higher cost of funds and, according to critics, recoup profits lost to non-bank mortgage lenders in recent years.

For those home loan borrowers that are paying more off their mortgage than required, this buffer means that slight increases make little impact. Those that are not in such a fortunate position will, of course, need to tighten their belts even further.

There are, however, some positive signs ahead. The price of oil has been retreating this week, Australian inflationary pressures are cooling, so there may be only a few interest rises to go before we experience the peak. And, with consumer confidence at the lowest since in 16 years when, as it happens, interest rates were 17%, we are unlikely to suffer the experiences of the early 1990’s.

Michael Marquette

Surely everyone has come to terms with the fact that the heady days of the real estate boom are well behind us. Quite simply, lamenting “those days” is like the dull sound of a sinking bell.

On the polar side to that period, however, is witnessing the interesting positions people are taking. Right now: some are trying to be released from property’s grip , others are playing a waiting game, planning for real estate prices to cool further and being rewarded with a better “bargain”, whilst the third group of people are holding steady.

RELEASE: with a cooling global economy, warming local inflation and interest rates, and red hot concern over whether Australia’s mining boom will erupt, spilling lava over a nervous population, there are many people feeling the push out of property.

CATCH: secondly, there are those people waiting to be rewarded for their patience by waiting for a bargain to drop from the sky. Of course, the danger here is not having an interest rate crystal ball – what may be a bargain now may not be in the future if interest rates should rise and negate any immediate gain: it’s a fragile balancing-act-like strategy that is either one of exceptional foresight or balls of steel.

Similarly, many are waiting for enough people to jump in before they do – the “lemming” approach is not one that Marquette Turner would recommend, now or at anytime.

HOLD: finally, those able to hold and are able to factor in rising rates are experiencing rising yields, with rents finally favouring the landlord after many years in the doldrums. There are many encouraging signs that rental returns are improving. Recently released data shows that there are now 60 suburbs within their respective capital city’s metropolitan area, throughout the Australian mainland that are experiencing a gross return of six percent minimum

At present, the cost of living and affordability are factors being felt by most Australian’s and whilst getting used to it maybe a bitter and painful pill to digest, there may be some good lessons and ever better decisions made.

You may have noticed Marquette Turner’s motto, “be a property intellectual“, and this should resonate now more loudly than ever.

Look at it this way, if it encourages real estate buyers to take more measured and counseled choices and decisions than once they may have, then the future of Australian real estate is solid, positive, and an excellent investment strategy. Remember these words: once a good buy, always a good buy!

Simon Turner

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It may seem obvious that what goes up must come down, but there are some property owners out there that are learning this the hard way. Quite simply, the appreciation of real estate is not a guaranteed birthright, nor a foregone conclusion.

In boom times, many of your friends and acquaintances may be sharing with confidence and bravado their two cents worth of real estate insight over the dinner table. You may hear such claims that “real estate prices only go up,” “everyone has got to live somewhere,” “the population will never go down” or, and this is the time your alarm bells should be ringing, “trust me!”.

As we are experiencing now, when economies and markets come under pressure, together with buying too high and borrowing too much, there is almost an inevitable period when property prices will head southwards.

Over-eager buying and over-zealous lending has meant that in lots of cases real estate prices in the short-term have had nowhere to go but down. Buying or selling is a stressful enough period in one’s life without facing additional pressures.

Figuratively Speaking

The costs involved with selling real estate can be around five per cent of the total sale price when you factor in sales fees, legals, taxes, moving costs and other selling expenses.

That means that a property must therefore appreciate by the same amount for you to break even on your initial investment.

Go one step further and if you’ve paid perhaps ten per cent too much for the property, you must somehow recoup 15 per cent just to return to “Go”: there’s no advancing and you can’t even collect $200, to use Monopoly language.

Making money can be a challenge at the best of times, but finding an extra 15 per cent just to forego it is an awful lot of extra padding and cushioning to build in to an initial purchase price.

On the plus side, and there is still plenty of positive news, those that can weather a less than booming economy, who bought well, borrowed sensibly and paid off plenty will be rewarded, as over the longer term real estate prices have traditionally shown excellent appreciation and will no doubt do so in the future.


If you can buy AND sell at a time of YOUR choosing, not your banks, your accountants, your employers or anyone else’s time you will be handsomely rewarded.

Constantly educate and re-evaluate yourself, your wants and your needs. This will ensure that you have a full appreciation of your financial position and make well informed choices if, when, and why ever you need to make them.

“Be a property intellectual” by frequently visiting our blog and the many other resources on the internet: they will stand you in great stead for the future.

Simon Turner

Figures suggest that borrowers are shying away from fixed-rate home loans, a sign of growing belief that the economy is slowing enough to ward off interest rate rises.

Traders in financial markets are, however, betting on quite the opposite. Yesterday, they lifted their bets that the Reserve Bank of Australia will raise rates more than once by the end of the year. Michael Marquette of Marquette Turner continues to believe that we are likely to see at least two more rises by the end of the year.

By March, almost one in four borrowers chose to lock in their home loan rate to avoid being caught out by more increases. The demand for fixing loans waned, however, in April, and fixed-rate loans dropped back to 17.5 per cent of the total market.

This could perhaps suggest that borrowers are becoming more pessimistic about the state of the economy and therefore confident that inflation and rates could fall.

The unsteadiness of the market comes amid more evidence of a dramatic fall in confidence among prospective home buyers. Housing finance figures released by the Australian Bureau of Statistics showed the value of new housing loans dropped 3 per cent in April – the third month in a row of solid falls.

Christine Watson

A recent survey has found 47% of property investors and one third of homeowners could be forced to sell up if interest rates increase by 1%.

This is certainly worrying news for many Australians, at a time when ANZ have predicted interest rates will rise by 0.5% before the end of 2008, with the bank tipping that a 0.25% rise will happen as early as August.

If ANZ is right and the banks continue to raise rates beyond the RBA’s official cash rate increases, the doomsday scenario of rates climbing by a further 1% could eventuate late this year or early next.

The survey of 2331 people by research firm Coredata also found that 76% of respondents are finding mortgage repayments more difficult after seven official interest rate rises in two years, and around 20% of borrowers are using more than half of their total household income on home loan repayments.

One in five respondents say they were running into debt to run their households and 67% claimed their financial situation is worse now than 12 months ago – an increase of 21% from November 2007.

Future interest rate rises may prove controversial. Former Reserve Bank of Australia governor Bernie Fraser says there may be a need to re-think the way the central bank attacks inflation, if rises in food and fuel prices persist.

Lachlan Semple of PSK Financial Services told Marquette Turner that “interest rate increases will further entrench a two-speed economy – slowing household discretionary expenditure while the resources boom continues, driven by insatiable Asian demand. Households, not businesses will feel the pain of recent and future increases, with mortgage servicing costs already up 40% in 12 months. It will feel like a recession in Western Sydney and the the outer suburbs of Melbourne with a subsequent flow on effect to other areas.”

International commentators have noted that Australia is fortunate that it’s government and the RBA have not tried to fend off inflation altogether, but has been quite tough on managing what it can relative to other Western nations.

For those paying higher petrol and food prices, and increasing household income going towards mortgage repayments this is, however, of little comfort for many Australians.

Michael Marquette

Thirty five people a day are going broke in NSW, with figures showing a rising number of Western Sydney families losing their homes to creditors.

The volatile combination of interest rates, rising food and petrol prices is forcing people to declare themselves bankrupt.

Research commissioned by the Insolvency and Trustee Service for the State Opposition shows a 10.3 per cent increase in people in Sydney becoming insolvent and a 6.3 per cent rise in other parts of the state.

Sydney’s west accounts for 40 per cent of all bankruptcies, but even wealthier areas are feeling the pinch with the northwest, inner east and North Shore showing some of the biggest increases in numbers of families going broke.

The high numbers are causing major problems for financial counselling services, who are unable to deal with demand. One charity said “draconian laws” encouraged people to go bankrupt.

Commuter suburbs where workers are spending vast amount of money on petrol are among the hardest hit.

Campbelltown was the hardest hit suburb with 301 people declaring bankruptcy in the past 12 months, Mount Druitt came in second and Liverpool, Prospect and Greystanes made up the top five.

Households in affluent suburbs such as Drummoyne, St Ives, Manly and Beecroft are also collapsing under financial pressure – those areas were in the top 20 Sydney suburbs which reported the biggest jump in insolvencies.

Another growing problem is “sexually transmitted debt”, that being property settlement and credit card debt that is not properly dealt with after a relationship breakdown.  With the strains of debt increasing, the emotional stress this causes is unsurprisingly leading to greater pressures on relationships.

Simon Turner

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