Your money or your hapiness
I recently read an article published on www.getrichslowly.org on the psychology of happiness and it reiterated a lot of what I have written about wealth and happiness here at Retire on Property, but what really caught my fancy in the article was that the author J.D. came up with a great list of 13 things each of us can do, easily, day in day out to feel happier.
To be more content.
OK, so it’s not exactly a topic on property investing or retiring early, but I do believe there is no point in trying to retire early or achieve financial independence if you can not be happy.
So I’ve listed below the 13 steps as outlined by J.D. and to be honest, I will actively work on this myself:
- Don’t compare yourself to others. Financially, physically, and socially, comparing yourself to others is a trap. You will always have friends who have more money than you do, who can run faster than you can, who are more successful in their careers. Focus on your own life, on your own goals.
- Foster close relationships. People with five or more close friends are more apt to describe themselves as happy than those with fewer.
- Have sex. Sex, especially with someone you love, is consistently ranked as a top source of happiness. A long-term loving partnership goes hand-in-hand with this.
- Get regular exercise. There’s a strong tie between physical health and happiness. Anyone who has experienced a prolonged injury or illness knows just how emotionally devastating it can be. Eat right, exercise, and take care of our body.
- Obtain adequate sleep. Good sleep is an essential component of good health. When you’re not well-rested, your body and your mind do not operate at peak capacity. Your mood suffers. (Read more in my briefguide to better sleep.)
- Set and pursue goals. I believe that the road to wealth is paved with goals. More than that, the road to happiness is paved with goals. Continued self-improvement makes life more fulfilling.
- Find meaningful work. There are some who argue a job is just a job. I believe that fulfilling work is more than that — it’s a vocation. It can take decades to find the work you were meant to do. But when you find it, it can bring added meaning to your life.
- Join a group. Research apparently shows that those who are members of a group, like a church congregation, experience greater happiness. But the group doesn’t have to be religious. Join a book group. Meet others for a Saturday morning bike ride. Sit in at the knitting circle down at the yarn shop. Join an investors club.
- Don’t dwell on the past. I know a guy who beats himself up over mistakes he’s made before. Rather than concentrate on the present (or, better yet, on the future), he lets the past eat away at his happiness. Focus on the now.
- Embrace routine. Research shows that although we believe we want variety and choice, we’re actually happier with limited options. It’s not that we want no choice at all, just that we don’t want to be overwhelmed. Routines help limit choices. They’re comfortable and familiar and, used judiciously, they can make us happy.
- Practice moderation. Too much of a good thing is a bad thing. It’s okay to indulge yourself on occasion — just don’t let it get out of control. Addictions and compulsions can ruin lives.
- Be grateful. It’s no accident that so many self-help books encourage readers to practice gratitude. When we regularly take time to be thankful for the things we have, we appreciate them more. We’re less likely to take them for granted, and less likely to become jealous of others.
- Help others. Over and over again, studies have shown that altruism is one of the best ways to boost your happiness. Sure, volunteering at the local homeless shelter helps, but so too does just being nice in daily life.
That’s it. Nothing too difficult, just try it and stick with it. Perseverance.
And yes, it does work, even though I struggle to do all of these on a regular basis when I do manage to stick with it I can feel the difference.
We all have rotten events in our past and finding meaningful work can be difficult, but if you don’t find your job meaningful and feel you can’t change, then think why you are doing this job and how doing this job contributes to your goals. That will help. Apply the same positive thinking to all 13 and you’re well on your way to becoming a happier and more content person – and isn’t that what we all want in the end?
The list that JD compiled for his blog, was largely based on work done back in 2004 by, of all people, a global equity strategist! His name is James Montier and his original work can be found at http://www.trendfollowing.com/whitepaper/happiness.pdf
US House prices may face a long decline
US houses, as everyone knows, are deflating. There are signs that the fall in housing prices is slowing down, but the trend is still down and there are reasons to believe the US decline may continue for quite some time. As Robert Shiller in the New York Times explains:
“Long declines do happen with some regularity. And despite the uptick last week in pending home sales and recent improvement in consumer confidence, we still appear to be in a continuing price decline.”
“There are many historical examples. After the bursting of the Japanese housing bubble in 1991, land prices in Japan’s major cities fell every single year for 15 consecutive years.“
“Why does this happen?”
Shiller explains that housing markets simply don’t adjust quickly and in economic terms, they are not efficient. People make their housing decisions years in advance based on (expected) changes in their lives and these decision are often partly emotional. They may have found a job somewhere…or gotten a divorce…or their children may have left home…or they might just want to live in a different area. These plans take years to come together and years to execute. They can be reversed by changes in market conditions, but not quickly.
And then, when people are planning to sell a house, they may not be in a hurry. If prices slip, they may decide to wait, sometimes for years. Furthermore, decisions about buying or selling a house are often decisions taken by two people together. The husband may be desperate to get out of a sinking housing market, for example, but the wife may not want to leave her home. Even when they must sell for financial reasons, that decision can take months, even years to reach. Often, they hesitate. The wife expects to get a better job or the husband expects a raise or they anticipate some other economic change in their lives that would avoid the need to sell their house.
Then, after the decision is eventually made, there’s the actual process of selling a house: setting a price and finding a willing buyer. In a downward market, buyers’ expectations tend to adjust most quickly. Reading in the paper about a correction in the housing market, the prospective buyer expects a great deal. The prospective seller, on the other hand, tends to deny the severity of the downturn. He reluctantly and belatedly acknowledges that he’ll need to lower his price. But as he gives in the market gives way further. The prospective buyer hears about more great deals that other buyers are getting and he lowers his price targets even faster than the sellers lower their asking price.
Shiller gives another example: “An elderly couple who during the boom were holding out against selling their home and moving to a continuing-care retirement community have decided that it’s finally the time to do so. It may take them a year or two to sort through a lifetime of belongings and prepare for the move, but they may never revisit their decision again.
As a result, we will have a seller and no buyer, and there will be that much less demand relative to supply – and one more reason that prices may continue to fall, or stagnate, in 2010 or 2011.
All of these people could be made to change their plans if a sharp improvement in the economy got their attention. The young couple could change their minds and decide to buy next year, and the elderly couple could decide to further postpone their selling. That would leave us with a buyer and no seller, providing an upward kick to the market price….
Even if there is a quick end to the recession, the housing market’s poor performance may linger. After the last home price boom, which ended about the time of the 1990-91 recession, home prices did not start moving upward, even incrementally, until 1997.”
Now, the Australian property market is very different from that in the US and is unlikely to experience a downturn of the same magnitude or duration, however the same buyer – seller psychology applies in the Australian market and next time your buying or selling it worth keeping this in mind.
Painful blog and website update …
Just a quick update to let all of you know what’s going on with the blog and site at the moment.
As I am a Mac user I developed and maintain the Retire on Property website using Rapidweaver which is an excellent product and in general has served me well. It gives a good balance of functionality versus user friendliness and simplicity.
However, the standard blog functionality in Rapidweaver does not let you edit your blog or add posts through the web like for example Wordpress or other blogging software would let you do. And that is a bit of a pain as it means I always have to use my macbook and rapidweaver to update the blog. Not exactly what I wanted so I went ahead and installed a Rapidweaver plugin called WP-Blog and I eventually managed to get it to work but in my clumsiness and desire to keep my server neat and tidy I somehow managed to delete all my old posts… and I had no backup… Aargh!!
So over the next couple of weeks I will restore the blog and get the majority of old posts back as I do still have a number of them in varying states of completion. Watch this space and back up your blog posts right now!
Australia officially not in recession
Australia has escaped falling into recession – technical or otherwise. Wall Street is roaring ahead and the Australian share market is up around one third since it’s low point in May and Australian property markets are recovering.
The good times are here again! Well, not so fast …
At best we face a turbulent time for the rest of the year and or we could still have two quarters of negative growth and a technical recession later in the year. Or, and this could we worse, we face several years of slow decline followed by several years of no growth. One thing is for sure, nobody knows
Just so that you are clear, a recession is defined as when an economy stops growing and has 2 or more consecutive quarters of negative growth. Of course recessions are part of the normal economic cycle and most countries have a recession every seven to ten years. Australia has been an exception recently and hasn’t had a recession for about 17 years. So, I guess it was due one.
So as of now Australia has avoided one – but let’s be honest, if we forget the technical definition, Australia is in recession and probably has been in one for about 6 months. People aren’t spending, businesses are closing down, the property markets are flat, and jobs are being lost. So the real question is not whether Australia is going into recession or not, but rather, when is Australia going to come out of it. When will we see growth again.
So how does this affect you and me as real estate investors?
During difficult times like we are experiencing now around the world, people are scared of making big financial decisions. They don’t buy new cars and they don’t buy, sell or upgrade their homes. They also hold back from investing in property and this translates to fewer people buying property, which usually leads to a fall in prices. In other parts of the world this has caused a significant drop in values, with prices falling between 10 and 30 per cent in the USA and UK.
This hasn’t occurred in Australia. By and large property values have held up well due to the severe shortage of properties and more recently due to lower interest rates and increased demand from first home buyers (thanks to the FHOG).
There is still going to be more bad news in the press; unemployment will rise and more businesses will go bust. So don’t be surprised if you hear mixed messages from the media – sometimes about the green shoots of recovery and at other times about our troubles. The fact that we are getting mixed messages can mean we are at a turning point in the cycle, but maybe it’s just because nobody really knows. I for one think that the so-called green shoots in the US economy will fade soon, I think there is more pain to come, a lot more, particularly in the US and UK. However, I don’t believe it will end up with property values declining significantly in Australia.
The gloom and doom reports in the media for the last nine months almost caused Australians to talk themselves into recession. And some celebrity economists who predicted property values would drop 30% scared many homeowners and property investors, forcing some to sell their properties and others to hold off making buying decisions. However, those drops have not materialized; the fundamentals for the Australian property markets are sound.
Australia is experiencing the biggest migration boom in history, with 253,415 migrants arriving in 2008. Australia’s overall population grew by 1.91 per cent over the year – the fastest rate of growth in almost 40 years. Yet at the same time Australia is facing an undersupply of properties, historically low vacancy rates, rising rentals and low interest rates. Ok, the rent rises are slowing down and will probably stop soon, but interest rates won’t move up anytime soon considering the global outlook and demand for properties is here to stay.
In time the economy is going to recover, interest rates will then eventually increase and inflation is expected to return, most likely quite aggressively, due to the Australian government borrowing money and pumping it into the system.
The net effect of this is that investors who have parked their money in the safety of bank deposits will start looking for a new home for their funds. A safe haven that is a hedge against inflation. Many will turn to well located residential real estate and then property markets will really take off.
So, as far as I am concerned, there is a window of opportunity open NOW! A chance to get into the property markets when everyone else is still nervous and working out what is going on.
But don’t just buy any property. You need to have a long term focus and buy well located properties with an element of scarcity, in areas that have outperformed the long term averages.
Australia rated No. 1 economy amid downturn
Just a quick note today: a worldwide survey of 7,500 business peope in 24 countries has found that Australia is the nation best-placed to survive the global recession. One in five international business people rated Australia the strongest economy amid the downturn, ahead of China, India and Singapore.
The survey was conducted for Servcorp, a provider of virtual and serviced offices that operates over 60 countries. Mr Taine Moufarrige, executive director at Servcorp said that in his “ experience working with international businesses around the world, especially during the last six months, I’ve noticed how relatively unaffected (are) Australian businesses and… business persons’ attitude by the economic downturn… Over 71 per cent of Australian businesspeople believe we are the lucky country, and it’s interesting to see that the rest of the world agrees.”
A salient point is that the main concern raised by Australian businesses were pessimistic media reports; there is a feeling down under that the country is talking itself into a recession. Not sure if that’s really feasible, or actually happening, but it’s good to see the level of optimism that endures in Australia. Business confidence is critical when it comes to how this global credit crisis will play out, a higher the business confidence will mean less job losses and that in turn will avoid a recession from happening or at least avoid it from being deep and allow an early recovery.
Furthermore, some 25% Australian businesspeople said they were worried about the way the government responded to the global financial crisis. ”I think the doom and gloom reports that Australians hear every day are harmful to Australian businesses and hold them back from seeing the opportunities that are present in the current economic climate,” Mr Moufarrige said. He continues, “This is a time when Australian business confidence needs to be supported and encouraged in the media and by the Australia government.”
Now if you don’t live in Australia, where else should you be to have a good chance of weathering this global down turn? Here is the Top 10 countries best placed to survive the global recession, according to a survey of 7,500 businesspeople from 24 nations:
1st – Australia
2nd – China
3rd – India and Singapore
5th – Hong Kong
6th – Canada
7th – Japan and Qatar
9th – New Zealand
10th – Malaysia, Sweden and Vietnam
Interestingly enough not a single country from the Western Hemisphere…
Back, but now from Oman
It’s been almost 6 weeks since I last worked on the site and that is no good by any measure.
However, I do have a good excuse, as a lot has happened in the last few weeks: we have moved from the Philippines to Oman as a family, I have started a new job with Petroleum Development Oman and of course the whole family has had to adjust to living in a new country.
From the lush and green tropics of the Philippines to the arid and sandy coastline of Oman. From Manila, a mega-city with 12 million people and lots of traffic and pollution to the quiet and peaceful surroundings of Muscat. Quite a change indeed.
On top of that of course, the fall-out from the credit crisis continues to impact the global and local economies and potentially will change the way many of us live. No more easy credit. Now, I haven’t followed the financial or real estate news closely in the least few weeks because of our move, but I do get the impression that the press are keen to exploit the slightest development into a big story, exaggerate, and publish misleading statistics – don’t they always?
Personally I feel that we still in the early stages of this economic development. It is going to be a long haul, it will get uglier and I strongly feel that the current share market rallies are nothing more than bear market rallies.
As for property prices, the drop in house prices in the US and the UK have been widely publicized, but I do not believe that Australian house prices are heading the same way. We are not going to see falls of 20% or even 40% across the board – yes some properties will dive in value, especially the upper end of the market. And over-leveraged owners in that segment who need to sell will get savaged.
Might be just about the right time for us to buy a bargain luxury home for when we migrate to Australia…
Property Investing | World’s Most Expensive Cities
You remember the Demographia report stating that Australia was the most unaffordable housing market when comparing against the US, UK, New Zealand and Canada? Maybe you also remember I didn’t buy all that the report had to say especially if you look at real estate prices in a $/m2 price to help bring a ‘quality’ aspect into the Demographia analysis.
So … I’ve done some more research and according to one source (Global Property Guide, see the link at the bottom of this post) Australia maybe not be the cheapest place on earth but it most certainly isn’t the most expensive either.
In their analysis Global Property Guide have looked at the typical buying price per square meter for a 120 square meter apartment in a prime inner city area.
This is their Top 10:
| City | Buying price in USD/m2 | |
| 1 | Monaco | 45,713 |
| 2 | London | 23,837 |
| 3 | Moscow | 16,739 |
| 4 | Hong Kong | 16,052 |
| 5 | Tokyo | 15,851 |
| 6 | New York | 14,898 |
| 7 | Paris | 11,646 |
| 8 | Mumbai | 11,413 |
| 9 | Singapore | 10,723 |
| 10 | Rome | 8,806 |
Sydney is ranked the 17th most expensive city in the world with 6,764 USD/m2. And if you go to their website you can find a more comprehensive list of some 80+ cities world wide, but the list only includes capital cities so it’s limited in a way.
Now, the questions is, is this data any more reliable than that presented by Demographia in their affordability report?
Well, to some degree it is as the data used i.e. typical price for a 120 m2 unit in prime inner city area and size are probably more easily quantifiable, but both ‘typical price’ and ‘prime inner city area’ are obviously still subjective to some degree.
And yes, a price per square meter says little about relative affordability i.e. housing price versus income. However, I believe this is valuable data that you should take into account next time someone tells you that Australia is the most unaffordable housing market.
I personally believe Australian housing is quite affordable by international standards when you take into account what your money buys. I also believe that one of the reasons Australian housing is seen as unaffordable is that too many Australians, especially first time buyers, expect too much for too little too soon. And therefore I expect that in the next decade or so Australia will see a significant shift in housing where medium to high density living becomes much more the norm. The shifting Australian demographics and the up and coming Gen Y will only support that change. And with that, the McMansions in suburbia will soon become relics from the past.
Source: http://www.globalpropertyguide.com/most-expensive-cities
Australia’s housing the most unaffordable
The 5th annual Demographia Housing Affordability Survey is just out and it ranks the Sunshine Coast in Australia the most unaffordable place to live in the world. In fact, according to Demographia Australia has 13 of the most unaffordable cities in the global Top 30 and none of the 27 Australian markets are considered to be affordable. Many of you who read this might well agree, but being an expat who has lived overseas and originally comes from Europe I just can’t get to terms with these statements so I decided to have a little dig…
First of all, before we get too excited the Demographia report (conveniently?) excludes large parts of the world, and only considers Australia, Canada, Ireland, New Zealand, the United Kingdom and the United States. It does not take into account many of the worlds truly unaffordable cities.
None of the asian giants… No Hong Kong, No Tokyo, No KL, No Singapore. None of mainland europe… No Paris, no Frankfurt, no Rome, no Zurich or Stockholm, no Barcelona. Not a single one. Nada.
Secondly, for Demographia to consider a market affordable the ratio of median house price divided by the median income in that market must be 3.0 or less. Australia’s median ratio is 6.0 with the Sunshine coast topping the chart at 9.2. That meansthat according to Demographia the median property in the Sunshine Coast costs 9.2 times the median salary. Significantly worse than New York at 7.0 or London at 6.9.
Come on, do you really believe what Demographia is saying here? You seriously think that living in the Sunshine Coast is less affordable than living in New York City or London?
You have to be joking.
The Sunshine Coast is one of Queensland’s and therefore one of Australia’s most popular places to retire to. For the wealthy that is. So we have a lot of asset rich folk who no longer work and hence have relatively little income, but have used their assets to buy themselves expensive retirement homes. That will certainly skew both the median income and median house price statistics for the Sunhsine Coast.
And that brings us to a third concern with the Demographia study, which is that all their analysis and their conclusions are based on median house prices and median income data. Both of which are highly unreliable statistics and very easily skewed. I won’t go into the detail here why median prices are so unreliable, that’s for another post. But if you don’t believe me have a read of an article written by Bob Wilson and published at www.hotspotting.com.au. It’s an interesting read and once you’ve digested it you will read all the media reports on the property market with a different view! Expressing housing affordability as a price multiple of income is popular and has its merits, but because Demographia have combined so many incomparable markets I feel that their data-set and therefore their conclusions are not internally consistent. Does it really make sense to compare the ratio of median house price divided by median income in the Sunshine Coast with that of New York or London?
A fourth big issue I have with their analysis is that there is no quality aspect taken into account. The average, or should I say median, Australian house is much larger and has significantly more land content than for example the average or median property in the UK. I have stated in the past that Australians choose to live expensive with large properties on large plots – and guess what, there is a price to pay for that when it comes to housing affordability! If you were to compare property prices taking into account a quality or at least a size factor I think the results will look very differently indeed. In fact I might go and have a look at that.
Ok, but what does this all mean for the Australian market, are properties really that unaffordable and is that a recent thing or has it always been like this? Well, without much more research I can’t really answer that, but the graph below taken from the Demographia report suggests that we have to go back as far as the early 1980’s to find affordable houses in Australia’s capital cities – in fact even in 1981 Sydney’s price/income ratio was around 5 – seriously unaffordable! So it seems to be a structural issue if we were to believe Demographia, but one that has worsened over the last decade or two.
And indeed, Demographia states that the main reason for Australia’s unaffordable house prices is structural, in that there is a lack of land being released for development and the level of government intervention / influence in the development process is too high which is driving up development costs. Now, there is a lot of sense in this, and recent steps taken by Melbourne to release large amounts of state land and improve affordability would support this. But unfortunately the Demographia report is so unbalanced and lacking in other areas that it never becomes more than a narrow minded view, almost that of a lobbyist… funny enough, I also read somewhere that Demographia is heavily influenced by developers. Developers who want easier access to more land. Coincidence?
One thing the Demographia report did reinforce to me is the likelihood of a major trend developing in Australian property markets, one that will bring the median property price down: increased density. Radical reduction in land content and significantly reduced floor areas, through more innovative designs and use of technology. And, with the demographic trends set by Gen Y I think this will be one of key trends in the next decade.
More information:
Why the real estate boom will not bust …
Before you declare me completely insane and out of touch with reality, the title of this post is actually not my claim, but that from Chief Economist David Lereah of the US National Association of Realtors (NAR) made back in 2006. I just thought it would be interesting to see how things have changed.
David Lereah wrote a pre-bust classic in 2005 titled “Are You Missing the Real Estate Boom — The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade – And How to Profit From Them.” Lereah, who was later dubbed by critics as the Baghdad Bob of real estate, updated the book and re-released it in February 2006 with the new title: “Why the Real Estate Boom Will Not Bust and How You Can Profit From it.”
The bust began a few months later and we all know how the house price bubble deflated and the effect it has had on the global economy.
So how come the housing crisis has come as such a surprise to so many people?
The largest part of it is what we can call bubble psychology. Economists often quote Stein’s Law: “If something cannot go on forever, it will stop.” And the easy credit that the housing bubble was built on, was one trend that could not go on forever. So it ended. With a bang.
But that doesn’t explain the surprise element. Consider this, once a bubble is well and truly underway people forget that prices go up and down, be it houses, stocks, gold or food prices. They all go up… and down. But, towards the top of the cycle, just about everybody forget the basics and cheerfully states that this time it will be different, that we are in a new era. But the internet bubble of the 90s wasn’t different and neither was the housing crisis. It all ended in tears.
There seem to be several dimensions to bubble denialism, there is the denial of the average person which is largely based on the concept that ‘my neighbor, or uncle made a killing in real estate therefore I will too…’ and in our eagerness to make a killing too, to get rich quickly, to measure up, we deny ourselves to see reality. We keep telling ourselves, this time is different.
And there is the political dimension. According to the WSJ, “former Fed Chairman Alan Greenspan frequently argued there could be no housing bubble.” Well, he and the White House wouldn’t have wanted the public to realize their recent increase in wealth was nothing more than a bubble waiting to burst, would they. That’s not good for elections. Cynical but true, no government will admit to a bubble unless it has burst. And even then they’ll try to cover up the mess.
Of course, there is the vested interest, the people making money out of people investing in real estate: real estate agents, finance brokers, mortgage companies, you name it. They all had too much skin in the game to admit the reality of a bubble. And then of course you have the media who swing from one end of the spectrum (“The Boom Will Not Bust”) to the other (“Housing Bubble Explodes”, “Next Great Depression”). In reality, there were plenty of voices out there claiming a bubble was waiting to burst, there was sufficient data to support those claims but bubble denialism made sure these voices were not heard until it was too late.
Now the interesting question is, does bubble denialism also apply to depressions? Are the US, the UK and other Western European states facing a depression but not willing to see it? If so, the pain caused by the housing crisis and ensuing global credit crisis is only the beginning of what is yet to come. Now there is something you don’t want to admit to…
Site is up
Well that’s it, I have finally managed to get this site off the ground on on to the web, that’s a major step forward. Over the next months I will continue to build on the initial structure and upload as many useful and relevant articles as I can. I know from some research on the web that the first few months, in fact possibly even the first year I should not expect to much traffic, apparently traffic comes in one of nature’s famous exponential curves. I.e. you wait forever and then suddenly you get almost too much. I also understand that many website publishers and bloggers give up before the start to see an increase in their traffic. Now that I know it’s going to take a long time it will be easier to stick with it.