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Australian Housing Bubble: How to Spot a Bubble

Australian Housing Bubble – Is It Real?

Fig 1: The driver of house prices since 2012 is aggressive cuts to the RBA Cash Rate.

There has been much conjecture over whether or not the Australian Housing Bubble actually exists. Is it a bubble at all? Or is it the result of a flourishing economy that knows no bounds and is projected to continue rising to infinity and beyond? Unfortunately, the answer is not a simple one, although our friends at have pulled an incredible amount of research from multiple sources (predominantly the ABS) so that you don’t have to! Apparently, the name ‘’ comes from the notion that you should do your research before making a large financial investment… Good advice! In our short advice below, we’ve borrowed some main points from their extensive report, highlighting only some of the gripping evidence that can be found in the full version here.

1. Identify Performance-Related Factors for Growth

In the case of the Australian Housing Bubble, a number of factors have contributed to the rather consistent rise in house prices over the last 30 years. The economy has experienced an extensive period of growth, with export opportunities and industry growth creating more jobs and potential to create wealth. Major cities have expanded tremendously, and population growth has also contributed. And, as any economist will tell you, the supply-demand argument is always relevant. Demand for housing drives prices up, but it also drives supply. Supply, on the other hand, can affect demand as well. For example, the oversupply of apartment complexes in some of Australia’s major cities had the building industry fearing a downturn in demand, and thus, prices. Obviously, there are many factors to consider, so do your research!

2. Identify Policy-Related Factors for Growth

Again, we’ll use the Australian Housing Bubble as an example. Interest rates, a reflection of the RBA cash rate, have certainly influenced the direction of the market. Figure 1 highlights this effect, and a further breakdown of this factor is presented here. Another interesting consideration is the effects of negative gearing, which has stimulated investment in the Australian housing market for some time. The ABC can explain this further, and touch on the effects of Labor’s shock election loss which saw negative gearing remain for the time being. In addition to the two factors discussed so far, more incentives are being offered by the Australian government to make loans (debt) more accessible for first home buyers. APRA have changed lending standards to make it easier for banks to lend. Continued debt growth is crucial to ensure the survival of housing price growth. But are the measures influencing debt growth sustainable?

3. Identify Risk Factors

So, if there is no Australian Housing Bubble and the whole thing is a lie, then there should be no proverbial ‘pin’ to pop it with… But wage growth, the unemployment rate, and a struggling retail industry suggest otherwise. The disproportionate growth rates between debt/house prices and wages is frightening, says A nation of people once purchasing houses at 2 x their annual wage, are now being faced with a median house price 8 x their wage (10 x at the peak). Whilst some media commentators have cited the inability for prospective first home buyers to save, the growth rates in Figure 1 suggest otherwise. note that wage growth is basically flat, once correcting for inflation. Before accepting either argument, consider what current factors could affect prices in the future.

Australian Housing Bubble? It’s Never That Simple…

Unfortunately, it’s never that simple to claim that yes, there is an Australian Housing Bubble, or no, there isn’t. But hopefully this short brief has encouraged you to read the extensive report at Do your own research. Make your own mind up. Read what the experts are saying, but also consider if they have an agenda. Should you discount everything your real estate agent tells you? Not necessarily, but you probably shouldn’t mindlessly accept it all as truth either! So, in the words of our friends… “Don’t do it until you’ve run the numbers!” –

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5 Ways To Have Fun For Free

Fun For Free The Short Advice

The Simple Things in Life…

If you ask the minimalists, they’ll tell you that there is freedom in simplicity. And they’re right. You can live without the extreme excess that is being sold to us as necessity, and still achieve your own state of internal happiness and have fun for free! In fact, thats about the only way you can do it sustainably. Concepts like fun and happiness can’t always come from material items and things with monetary value, because then we’d be submitting our fun-having abilities to the dollar! Rather, it comes from experience and relationships. Relationships with people, relationships with places and relationships with the environment.

How to Have Fun For Free (Mostly).

Our ‘Fun For Free’ list consists of some activities that may require financial outlay… BUT they do not include directly paying for a ‘fun activity’, but rather rely on one’s own ability to create their own fun. In the land of technology, gadgets, and short attention spans, fun has sadly become a term that is commonly associated with staring at screens. It’s not all bad of course, but you can’t sit around reading The Short Advice all day… That’s why most of the items on our list include some degree of physical exertion too. After all, exercise has been linked to happiness and positivity. So, read on, but don’t do it all day – Get out there and have some fun for free!

1. Roadtrips

So obviously, you need to have a car and some petrol… but if you’ve already got these things it’s sort of a free activity right!? Roadtripping is a fantastic way to build relationships, and develop a fondness for your surroundings. Bring a pillow and a blanket and all of a sudden you’ve got accomodation on wheels. Its a sense of freedom that you’ll learn to appreciate, and one that you may have forgotten about. It’s too easy to get caught up with work saving for expensive holidays that you forget how easy it can be to just jump in the car and go exploring.

2. Hit the Beach

Hot, cold, freezing – who cares! Sometimes a bit of discomfort can make for a fun and memorable experience when shared with people you love. “Remember that time we swam in the middle of winter, and then we had to thaw out in the shower for 15 minutes?” Run, play ball sports, swim, lie on a towel, listen to music – the beach has it all and it’s entirely fun for free. Remember, fun is what you make it to be. If you approach the situation with a positive mindset, you will inevitably have fun. But, if you’re hesitant you might talk yourself out of a good time before you even get there! The beach is great, the beach is great, the beach is great… Go have a great time!

3. Learn an Instrument

Sure, you’ll need to purchase an instrument. That does cost money… But learning it doesn’t cost a thing! There are countless online tutorials to help you along the way. You can follow along at your own pace, and choose to dedicate as much time as you like. And if you don’t want to fork out to buy an instrument, you can sing instead using your very own built-in voice instrument (a.k.a your voice box). Music is a fantastic creative outlet that can be solely driven by your own passion and interests. As any creative outlet does, it also allows you to express yourself, and may even provide a therapeutic element to ease stress.

4. Read a Book

The age-old way to have fun for free that grandma has been trying to tell you about. If you’re not into reading books, there are too many reasons why you should start… The first being, it will make you smarter. Reading improves your vocabulary, but it also gets you thinking and using your imagination. Books require you to visualise people, places and things, which also means that your experience with a book can be quite different to the next person’s. With endless genres available, your options are vast. Take yourself to another world, and have fun for free with a good old fashioned novel.

5. Invent a Game

Exercise your imagination and get creative! It might actually be the best way to have fun for free. Wherever you are in the world, this is a fail safe way to enjoy yourself. You just need a bit of creativity. As you play, you can refine your new game with your friends. It doesn’t matter how old you are, or where you are. Use what is available to you and make something cool, just because you can! Thats part of the fun. The more you do this, the more you’ll realise that fun is a tool that you will always have at your disposal, whenever and wherever you go.

Final Note

Fun seems to have become a by-product of money, but it doesn’t need to be the case. You can have fun for free in a variety of ways, if you’re open to it. Its an important part of being happy and it shouldn’t stop when you reach a certain age. Use your imagination, get outside, get active. Do it with the people that you care about the most. You can have fun for free if you choose to, so don’t always believe what the TV is telling you…

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How To Change Your Job: 5-Point Check

Change Your Job Sunset

So You Want to Change Your Job…

The sun is setting on your current job. Maybe you’ve been working in the same role, and in the same industry for ten years. Maybe you feel trapped in your role, and need to make a change. Well, there’s good and bad news for you… Change is very possible – that’s the good news. The bad? Well, change is often very difficult, too. So the most important variable to consider now, is how bad you want it, and how hard you are prepared to work in order to create sustainable change. If you really want to change your job, and make it work, there are a few important points to consider before you jump ship…

The 5-Point Check List to Change Your Job.

Leaving your job can be an incredibly difficult thought, especially when you’ve worked tirelessly to develop a good reputation for yourself within your workplace and industry. If you’ve been in your job long enough, you may even have ‘climbed the ladder’ somewhat, and be earning decent money. So, how do you give it all up and start again? This is what makes change so challenging…

1. The ‘Want/Need’ Variable

How bad do you want to change your job? Do you want it so bad that you need it? Maybe your role is actually so physically demanding that your body can only manage for so long in your current field of employment, and thus, this is change that is sorely needed. Or perhaps the mental strain is so much so that it is affecting life outside of work too. Is it time and repetition that has got you down? That can happen in any job. The point here, is that there are degrees of want and need. It can help to write down a pros and cons list of both staying in your job, and seeking out a new one. Write down your reasons for wanting to change your job. Are these reasons exclusive to your career choice, or could they arise in any future position? Understand your motives, and make an informed decision.

2. Goals and Systems

A much discussed topic on this blog, and rightly so. Now that you’ve understood the reasons for, and degree that you ‘want/need’ to change your job, it’s time to plan for the future. Goal-setting is a great way to track your progress and motivate yourself towards achieving your desired career outcome. You might have one long-term goal, preceded by a series of short term goals, or ‘stepping stones’, to keep you on track. These short-term goals will be the product of your ‘systems’, which are the things that you do regularly like studying, exercising, and learning, in order to continue achieving your goals. Sometimes, the systems you employ to be successful are even more important than the goals themselves. Goals may change as your interests do, but it doesn’t mean that you’ve given up, nor does it make your systems redundant.

3. Time Commitment

Now that you have created some goals and thought about the process, you need to think about time. How long will this change take to be in affect? Is it a matter of simply applying for a new role until you get one? Or will it take training and learning new skills in order to be competent? Consider both the duration of the entire process and the weekly time commitment. It is unaffordable for most people to quit their job and then look for another one without any source of income. So it is likely that you would have to take on a greater workload, on top of your already trying working week. You may have to sacrifice some activities that you enjoy for a period of time. Are these all things that you are willing to do? Short-term pain, long-term gain.

4. Work Ethic

An important attribute that is valued in every workplace. Job satisfaction has been known to have a positive relationship with work ethic, creating increased productivity. But does it work the other way around? Consider a scenario where a strong work ethic generates recognition for an employee amongst their superiors. This could lead to promotions, bonuses, and increased job satisfaction. Here, hard work is the independent variable, and job satisfaction the dependent. Now it’s time to reflect on your current situation… Have you become lost in the monotony of your job and dropped the ball? It might pay to become a social scientist of sorts, and test the hypothesis that an increased work ethic could increase job satisfaction. Because if this is a factor that you could improve, it may still be one after you change your job…

5. Happiness

You’ve heard it before and you’ll hear it again… Life is too short to be unhappy. Especially from something as trivial as your job (in the big scheme of things). Work can feel like it is consuming your life, when really it is supposed to be enriching it. In a perfect world, your employment should be meaningful and full of purpose. But the reality is that we don’t all get to fulfil our childhood dreams. That doesn’t mean that you can’t find a work environment with good people and prospects. Overcome the fear of failure, and make a positive change if you believe it is right for you. Go through your checklist, exhaust your options at your current job and leave no stone unturned. If you still decide that you need to change your job, then do it! Allow yourself a life of happiness now, because time is the most valuable currency – not money.

Final Note

Nothing is ever easy! But that doesn’t mean it’s not worth doing. The challenge of starting again after you change your job can seem daunting. But the rewarding feeling of overcoming your fears and inhibitions might drive you to continue growing into the person that you want to become. Keep trying, keep pushing, don’t settle until you’ve found your own piece of sustainable happiness. Invest in yourself, and create the world that you want to live in. Thanks for reading, and good luck in your new career path!

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Entering The Property Market (Part One): 5 Major Considerations

entering the property market the short advice

About the Author

Stephen Pace is an experienced commercial and residential mortgage broker with BCP Finance in Melbourne’s leafy suburb of Parkville, on the city fringe. He specialises in home and commercial loans, and has agreed to share some general advice when it comes to entering the property market. Today’s article is part one of a two-part series, so be sure to follow posts over the coming months for part two! So, if you’re considering entering the property market and you’re looking for a lender, look no further than the very knowledgable Mr. Pace, and here’s why…

Entering the Property Market

Financing a property is always challenging and as for most in the general public, it is very likely that you will have to think long and hard whether or not you’re ready and capable of making such a financial commitment. Buying a property is usually the single most expensive transaction a person will make in their life, and if done right, entering the property market can be both a smart expense and good investment.

1. Purpose – Owner Occupied Vs. Investment

The first primary factor when considering entering the property market is to determine the purpose of the purchase. Are you looking to purchase this property to live in? Or are you looking for an investment purchase seeking to obtain rental income?

The two key factors above impacts not only the buyers appetite but also the bank’s from a loan point of view, in regards to the minimum contribution, and also servicing factors. Making a decision can be tricky but is should be determined by your current financial and lifestyle position. Looking forward 1-3 years of your goals is a point recommended to help to assist your decision making. If you are seeking an investment purchase, there are 3 underlying factors which would determine if the property will make a good investment, these 3 simple things are; rental yield, capital growth potential and the underlying demand.

2. Analyse and Evaluate the Financial Commitment

Once a buyer has determined the purpose of the purchase, each buyer should evaluate their finances. As mentioned above, entering the property market can be the single most expensive transaction a person can make, so don’t go in blindly! Do some research and educate yourself in regards to property areas, fluctuations in property prices and lender appetite and requirement. It’s also important to know what to look for when prospecting for a property, to ensure you’re not falling into a financial hole of additional costs outside of the purchase price.

a) Buy What You Can Afford

In this current market, with the rise of cost of living, you should buy the house you know you can afford, no point buying a house and then all your pay goes towards the mortgage repayments, you still need money for cost of living. Mapping out a plan of attack by creating a strict budget is a good idea. In the period of seeking a property, try and avoid overspending, as this could jeopardise your financial stability – from here you should only consider the ones that you budget can handle.

b) Understand The Various Expenses of Entering the Property Market

A point that also must be considered when evaluating your finances is working out and getting comfortable with the on-going expenses and commitments post-settlement. A lot of buyers drain their bank account and put their every last dollar into the purchase, but don’t take into account the maintenance costs of the house and insurances. The question then gets asked, is it worthwhile looking into a brand new house or buying an established house in an established area?

c) Inspecting For Potential Costs

If the house is established, when inspecting a house you should inspect it thoroughly, focus on the structural stuff, aging appliances, cracks/chips/mould in the walls any leaks or water damage – you may consider paying an external upfront building report. Enlisting a professional for the building report will cover off on factors mentioned above, as well as:-

  • Ensuring the foundation is solid
  • Is wiring up to code
  • Is the house structurally sound
  • Are you buying a property that has any wood eating pests? How will you know?

This is an important point as maintenance costs can end up eating heavily into your savings and budget, so it is worthwhile saving some money in your bank account for a rainy day.

3. Identifying the Area and Type of Property that suits You

Identifying a property, the underlying area and buying to suit your lifestyle is important. There are some factors that cannot be ignored, such as:

  • Do you actually require a house? Maybe a townhouse or a unit would suit?
  • Is the area close to work? Family? Friends?
  • Is the property close to public transport and schools?
  • How is the condition of real estate in the area?
  • Is your area prone to bush fires? Flooding? Is it in a flight path?

The prices of property tend to vary in different locations and suburbs which is derived from several different factors. For example, a house that is situated in close proximity to infrastructure, walking distances to public transport, shops and schools, will generally cost more than a house located further from such amenities. Each location and suburb will have its own niche advantages; find out what suits your budget and meets all of your needs before making a final decision on which property to purchase or invest in.

4. Obtaining a Pre-Approval

Once you have worked out your potential purpose, created a budget and identified a preferable property type, where to from here? There is no written rule that you require one, but anyone in the financial game in this day and age would advise that obtaining a pre-approval is highly recommended.

Obtaining a pre-approval with a lender or approaching a mortgage broker for a professional opinion and guidance is worthwhile – we deal with this stuff every day and have the ability to guide and educate you throughout the whole process.

A pre-approval is a powerful tool to have up your sleeve; no doubt there will always be some mitigating factors or conditions to meet before going to a final approval, but it provides any buyer the confidence that they have the support from a lender. This will enable a buyer to attend an auction or even a private sale arrangement and confidently bid within their limitations.

5. Representation

Having a pre-approval provides confidence to any buyer entering the property market, as you have a lender in you corner to guide and assist you. So, why not continue to bolster up your team?

a) Real Estate Agents

Having a realtor that works for you and an experienced solicitor round off your trio. The seller pays the commission to the real estate agent, so it makes sense to capitalise on their free service as a buyer! The realtor can:

  • Provide area and property data
  • Identify current and potential properties coming up in the area
  • Share knowledge regarding the area and suburbs you seek to buy
  • Negotiate with the seller
  • Assist in additional inspections

b) Solicitors

Secondly, having a solicitor is beneficial. Each property sale will come with a contract and there will be papers to sign. And more papers to sign… And more! The contract will contain a lot of legal jargon, so who better to review and provide advice than a solicitor? Their role is to ensure that the contract is sound and there aren’t any mitigating conditions popping out that will put their client (you) at risk. The contract is originally drawn up from the seller, so there is room for negotiations. Whether you need additional time to settle, or another inspection of the property, or to waive a condition, your solicitor will act on your behalf to do all of the heavy lifting. This helps to ensure that the contract will meet your requests and obligations.

A contract of sale is typically drawn up and available when a property is advertised; it becomes available from the acting seller’s real estate agent. Before attending an auction, try and obtain the draft version and provide this to your solicitor; they will advise accordingly if everything is in order. This way, you can attend an auction or bid on a private sale with confidence. If there are any clauses which jump out to them, they can be amended on the draft and reviewed by the seller before either party signs.

Final Note

Whether you are an experienced property investor or entering the property market for the first time, buying a property is both an exciting and stressful experience. You may not always find a likeable home and buy it first up; there are people whom have been unsuccessful multiple times at auctions… Just remember to remain calm and positive that there are always many more opportunities. It is important to keep the above mentioned points in mind and all that is involved, including the moving factors and components within it. The more educated you are, fire power you have up your sleeve and stronger team you have to represent you, the better off you will be! The experience will become so much easier and more enjoyable.

Stay tuned for our next guest post in the coming months, detailing the important considerations of finding a home loan.

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How To Be A Successful Project Manager: PRINCE2

Vinnie PRINCE2

About the Author

Vince Giacchi began working for Mercedes Benz Australia Pacific as an IBL (working student) towards the end of his International Business Degree in 2012. After a successful IBL tenure Vince took a position with the parent company Daimler AG, at their headquarters in Stuttgart, Germany. Now back home in Melbourne, and having recently completed his PRINCE2 certification, Vince has found his calling as the SAP Project Manager at Daimler Truck and Bus Australia Pacific. Below, Vince has summarised the PRINCE2 methodology, providing professional insight into effective project management practices.

What is PRINCE2?

PRINCE2 (PRojects IN Controlled Environments) is a structured project management approach. It is recognised as a leading project management methodology, with over one million certified professionals worldwide. It was formed through the analysis and interpretation of a multitude of projects and the experiences offered by their respective managers, teams and sponsors. A PRINCE2 project is governed by seven principles, themes and processes which we will touch on below.

1. Principles (Why?)

A project does not meet the PRINCE2 standard unless all seven principles are applied. They provide the framework for each project undertaken, that guide and empower project managers towards management best practice. The seven principles are:

  • Continued business justification (Does this project make sense?)
  • Learn from experience (Don’t make the same mistake twice)
  • Define roles and responsibilities (Know everyone’s role)
  • Manage by stages (Break large tasks into a series of smaller ones)
  • Manage by exception (Instil autonomy within the working group)
  • Focus on products (Output orientated)
  • Tailor to environment (Adapt to any unique working environment)

2. Themes (What?)

The seven PRINCE2 themes offer an insight into how a project can be best managed. They can be interpreted as putting principles into practice. The themes are relevant from the beginning right through to the end of a project. The seven themes are:

  • Business case – The purpose of this theme is to assess if the project is viable, linking directly to the ‘continued business justification’ principle.
  • Organisation – Defining the project structure, creating accountability and responsibility. This theme links to the third principle ‘define roles and responsibilities.
  • Quality – This encourages project teams to ensure each output meets the required standards, and is fit for purpose. Relating to the ‘focus on products’ principle.
  • Plans – The purpose of this theme is to communicate how targets will be achieved. It focuses on all measurables within a project, i.e. time, cost, who and how. This theme relates to multiple principles.
  • Risk – This theme helps to identify, assess and produce effective mitigation against uncertainty, improving the likelihood of a successful project outcome.
  • Change – Assessing and controlling any changes to the project baseline (initial business case). ‘Continued business justification’ and ‘learn from experience’ are two principles relevant to this theme.
  • Progress – This theme is about tracking where the project is in reality, in comparison to the project timeline.

3. Processes (How?)

A PRINCE2 project is broken up into seven processes, most of which are managed by the project manager. All of the seven processes must be approved by the project board. The seven PRINCE2 processes are:

  • Starting up a project (Is the project viable/worthwhile?)
  • Initiating a project (Establish foundations/Define roles/Understand what needs to be done)
  • Directing a project (Refers to management from a board level – key decision-making)
  • Controlling a stage (Refers to management from a project manager position – monitoring/delegating/corrective-action)
  • Managing product delivery (Project manager works with team managers to agree, accept, execute and deliver requirements)
  • Managing a stage boundary (Duties relating to the end of a stage – review stage success, seek approval for next stage from board)
  • Closing a project (Used by the board to assess and accept the final outcome ‘project product’)

PRINCE2 in Practice: Working Through the Stages

Throughout each stage of a project, the themes and principles offered by the PRINCE2 methodology are ever-present. Let’s look at ‘building a house’ as an example project to demonstrate these processes in practice.

Before starting any successful project, it’s most important to understand what the clients requirements are, or in PRINCE2 terminology, the ‘project product’. A well-written preliminary business case and project brief will help you to do this. In this case, our project product is to build a house.

Once a project brief has been submitted and approved by the board, it’s time to initiate the project. The most important element at this stage, and perhaps the entire project, is the Project Initiation Document (PID). This document details the most important aspects of a project including scope, approach, finalised business case, roles and responsibilities, quality, change, risk and communications management, as well as the project plan. The PID acts as a ‘contract’ between the project manager and the board. The board in this case is represented by the owner and the architect, and the PM is the builder.

It is important to mention the three primary roles on the board, which are the executive, the senior supplier and the senior user. The executive has overall responsibility of the project (the home owner). The senior supplier is the architect, providing knowledge and experience representing the suppliers interest and providing supplier resources, i.e house plans. They deliver quality. The senior user in our case is also the home owner, as they are accountable for ensuring users needs are specified, and the solution chosen suits the end user’s needs. They define quality. Moving on…

The PID has been signed off, the project foundations established, now it’s time to build a house. Controlling a stage is the engine room of any project. Within this stage, the project manager will monitor, problem-solve and escalate to the board if need be. It’s also the PM’s responsibility to authorise, review and receive completed work orders, or ‘work packages’, which have been delegated to different team leaders for completion. In our example this, these ‘team leaders’ are embodied by the plumber, electrician, carpenter and others tradesman. Each trade represents it’s own work package, reporting directly to the project manager. The action of accepting, executing and delivering a work package encompasses the managing product delivery stage.

Once a stage is nearing an end, we move towards managing the stage boundary. This involves assuring all work packages have been completed in accordance with the PID (e.g. quality management approach). This stage also gives the project manager the opportunity to update the board so they are able to assess the progress, accept identified risks, and confirm the projects continued business justification. “Are we on track to build this house on time, and on cost?”

The slab was poured in January, the frame erected in March. The plastering and rough-ins were completed by the end of August, and the house has now been fit-off. We’re nearly ready to close the project. At this final stage the board needs to verify and agree that the project product has been achieved, before handing over the keys.

You might have noticed that theres one process missing from this example… Directing a project happens throughout all of the stages of a PRINCE2 project. As the project progresses through the various stages, the executive, or owner in our case, will oversee and manage by giving ad hoc direction, requesting status updates, approving progress, assessing change and providing final approval of the project product… A brand new house!

Final Note

The PRINCE2 project management methodology is in-depth, and this article is but a brief summary of how it can be implemented to give any project the best chance of being successful. As outlined above, the principles, themes and processes are all intertwined, defining the structure and operations of a well-organised and efficient project. To give your next project the best chance at success, implement the PRINCE2 project management method.

As always, thanks for listening, and thank-you Vince for sharing your expertise! If you have any questions about the article, you can post them in the comments section below.