Theresa Worrell: Weekend reads – Must read articles from the last week

There are more interesting articles, commentaries and analyst reports on the Web every week than anyone could read in a month.

Each Saturday morning I like to share some of the ones I’ve read during the week.

The weekend will be over before you know it, so enjoy some weekend reading.

Streaming and meal plans under the microscope as lenders target subscription services

Are your spending habits affecting your lending eligibility?

An article on Domain.com.au looks at how subscription services are affecting your next home loan application.

Industry insiders have tipped subscription services to be the next area under scrutiny as lenders crack down on excess spending.

Banks are getting much more serious about how hopeful borrowers spend their money, with streaming and meal plans joining gambling and buy-now-pay-later shopping sprees on the watchlist.

While a Netflix or Spotify account isn’t necessarily going to stop someone from getting a loan, experts say subscription services matter for borrowers because the costs add up and an applicant’s spending ultimately affects how much banks are willing to lend.

Whether it’s a gym membership, a meal plan, or a regular toilet paper, razor blade or cut flower delivery, subscription services soak up surplus income that could otherwise go towards loan repayments.

Director of 40 Forty Finance Will Unkles said some banks see subscription services as discretionary spending, while others count it as a cost of living and a recurring expense.

“The argument is that you can dial them up and down as an individual, unlike your car registration,” he said.

“For that reason, most banks will not count it as a big expense against you and add it to your cost of living.”

Mortgage Choice broker Caroline Jean-Baptiste told Domain banks have moved away from a flat view on how much people needed to earn to qualify for a loan, and are instead targeting ongoing expenses.

She said a subscription wouldn’t necessarily stop someone from qualifying for a loan but could be used to paint a picture of spending habits when calculating borrowing limits.

Adding up the cost of subscriptions

Research from Finder shows about one in three households has Netflix, and one in 10 has Foxtel.

A third of Australians have a gym membership.

Finder’s insights manager Graham Cooke it was easy to underestimate the recurring costs of subscriptions.

“If you’re on a low income, these can all add up quite a lot, and they can affect the amount you can borrow on a home loan.”

A typical meal service costs about $10.32 per meal, according to Finder. For regular subscribers, this works out to be about $72 a person (or $144 per couple) each week for dinners alone.

It’s a large chunk of the pie for just one meal a day, especially when compared to the $239 that a typical couple spends each week on food, according to ASIC’s MoneySmart.

Despite the cost, Cooke said there was a difference between meal plans and delivery services such as Deliveroo and Uber Eats.

“One is a replacement for shopping whereas Deliveroo is just convenience food,” he said.

Unkles said many clients were willing to cut their subscriptions after getting a loan, but banks wanted three months of proof that spending was under control.

He said people who don’t want to end subscriptions should consider scaling them back, and borrowers weighing up their options should consider the opportunity cost of convenience.

“The opportunity cost is you pay a premium for the food,” he said.

“If your goal is to save for a house, the opportunity cost for that is you have to spend more time cooking for yourself,” he said.

“You’re going to lose some time in your life, what do you value more?”

How living expenses affect borrowing capacities

Reckless spending habits can limit borrow capacities, as according to Jean-Baptiste, people who earn a lot tend to spend a lot.

“The number of people that spend all they earn simply because they need to maintain this lifestyle at this earning level is huge,” she said.

“There really needs to be a shift in mentality around holding on to your money instead of spending every last cent.”

Domain Loan Finder, Credit Representative 500208 is the credit adviser.

She said a couple earning $160,000 who spent $5560 per month – or $66,720 per year – on living expenses would only be able to borrow $760,000. She said this represented a “reasonable lifestyle”.

“They have two cars, health insurance, visit the hairdresser, get massages, have gym memberships, buy some clothes and spend $1000 a month on entertainment and socialising,” she said.

“They have a good deal on insurance, have two phones, internet, Netflix and Stan.”

A couple earning the same amount could boost their borrowing capacity to $970,000 by living a leaner lifestyle and cutting expenses to $3020 per month, or $36,240 per year.

Read the full article here

Transactions continue to fall

Transaction numbers are continuing to fall.

This Blog by Pete Wargen explains the numbers.

Low turnover

The annual take from stamp duty and land transfer duty in New South Wales remained reasonably strong at around $8 billion over the year to May 2019, as bracket creep has pushed property taxes far too high.

Those numbers are flattered by settlements from the tail end of the construction boom, however.

And even still transaction levels have continued to plunge towards decade lows over the year to May 2019.

Once the off-the-plan boom washes through the transaction levels will be at decade lows for sure.

Read the full article here

Which suburbs will make the footy finals?

Will suburbs and footy teams match up when it comes down to finals?

This article from realestate.com.au looks at the top teams and the matching suburbs.

We’re more than half way through the 2019 footy season and Geelong is cementing its place on both the AFL ladder and the property ladder, according to new data.

While there’s still plenty of fight left in the battle for the AFL top eight, realestate.com.au data shows that when it comes to property, one club is well ahead in price growth, and others have no chance of making the finals.

Year-on-year property price growth in Port Adelaide has risen by a staggering 42%, while Melbourne’s median property price has dropped by over 11%.

The realestate.com.au data compared the median property price – for both houses and units – for each of these suburbs associated with an AFL club over that same time period.

The data set also looked at demand for homes in footy suburbs, from 1 June 2018 to 31 May 2019, which had a minimum of four properties listed for sale per month.

So, where does your footy suburb sit on this ladder?

Port Adelaide

Although Port Adelaide is fighting hard to break in to the AFL’s top eight, the 5015 postcode is outperforming the competition when it comes to property.

With a staggering 42.64% growth in median sale price, it’s also the clear leader.

With Port Adelaide’s median prices now sitting at an affordable $480,000, and with demand dropping 20% year on year, it could be a great time to buy without fierce competition.

The three-bedroom home at 7 Formby Crescent is currently being advertised just above the median at $499,000.

Geelong

Cats supporters will be sad to hear their suburb has dropped to second place on this ladder (we know how well they take a loss).

In actual fact, Geelong is having another great property season, showing a strong 15.92% growth in median sale price, which is still sitting at a relatively affordable $670,000.

New jobs and infrastructure spending are supporting the growth, with many young buyers keen on properties close to train stations to commute to work in Melbourne.

This family home at 46 Bourke Crescent may be slightly above the median with a price guide of $685,000 to $750,000, but it’s only a short walk to GMHBA Stadium, which has to count for something, right?

Essendon

Stakes are high for the Essendon Football Club in the AFL this year, with the club firmly focused on trying to break into the top eight.

In contrast, the club’s corresponding suburb is having a much better season with a solid 9.68% growth in the median price, which is now sitting at $850,000.

In even better news, the suburb is sitting in third place on this ladder, and demand is on the rise.

This three-bedroom, modern villa unit at 1/10 Balmoral Street is below the median property price, advertised from $770,000 to $820,000, and it comes with two car spaces.

Greater Western Sydney

Greater Western Sydney may seem like a force to be reckoned with, but Olympic Park is having no such luck when it comes to the property ladder.

The median sale price has dropped by 4.46% and now sits at $769,000. Despite this drop, buyers are still keen to be close to all the action, with the suburb seeing a 17% rise in demand, year on year.

You could hear the siren from this two-bedroom apartment on level 27 of the iconic Australia Tower III. It’s on the market for $750,000.

Melbourne

Melbourne supporters are used to bad news, so they won’t be surprised to hear things aren’t looking good for the Demons on the property ladder either.

Median price has dropped by 11.58% year on year and now sits at just $420,000.

Demand for property is also slightly down. It seems Melbourne is struggling with conversion not only inside 50, but also when it comes to property.

Read the full article here

Green your home for less

What is the answer to reducing our electricity bill while being environmentally friendly?

In this article for Switzer, John McGrath looks at the options.

Soaring electricity prices and climate change are two hot button topics in Australia right now.

Political leaders want to be seen to be doing something on both scores through various programs designed to help us pay our power bills and reduce our carbon footprints.

The latest offering came in the Victorian State Budget – a $1.3 billion upgrade to their existing Solar Rebate Scheme to help Victorians access cheaper energy.

They’re offering up to a $1,000 rebate on the purchase of solar hot water systems; and householders can expect to save up to $400 per year on electricity costs.

There’s also a point of sale discount of up to $2,225 on solar panel systems; and you can take out an interest-free loan to help cover the rest.

The approximate saving on electricity bills is $900 per year.

In NSW, there are discounts for home owners replacing halogen downlights with energy efficient LEDs.

Both the lights and costs of installation are subsidised through approved suppliers, with ongoing savings of $210 per year on 20 light replacements.

New schemes include the Empowering Homes Program, which provides interest-free loans for NSW home owners who purchase home batteries, with the first lot available for installation in late 2019.

Solar systems will also be installed for free in 3,400 low income pensioner or veteran households as part of a trial commencing later this year in parts of Sydney and along the north and south coasts.

All these offers sound great and help meet some of the financial and environmental concerns of home owners today.

But I see benefits beyond this.

Climate change, other environmental issues and the cost of living will undoubtedly become even more front of mind for buyers in the future.

In today’s property market, buyers certainly appreciate green features but they’re not yet willing to pay much more for them. I believe this will change.

People design their lifestyle around what’s important to them.

We’ve seen this in the rise of apartment living – it’s more affordable, there’s plenty available in desirable suburban areas and they provide greater security and peace of mind for the increasing number of Australians who live alone.

Read the full article here

How to stand out from the crowd

In the game of success – it’s always better to stand out than fit in.

This article from Executivestyle.com.au shows how standing out from the crowd has led to great success.

When Todd Rose was 21 years old, he was a high-school dropout struggling to support his wife and two small children on state benefits.

He had done 10 minimum-wage jobs in two years.

“My favourite job was administering enemas to elderly people, because this meant I was allowed to drive around, rather than being stuck behind a desk or stamping aluminium on the factory floor,” he says.

“My father-in-law told me I was lazy, and I can’t blame him.

If this was my daughter, I’d be the same.”

Today, aged 41, he’s a Harvard professor with a string of accolades to his name, still happily married, with both kids at college.

“So I didn’t mess them up,” he says with a smile – and one hopes his relationship with his in-laws is less fraught these days.

One size does not fit all

Prof Rose is co-founder and president of the Centre for Individual Opportunity, and a faculty member at the Harvard Graduate School of Education.

And his groundbreaking new book, The End of Average, is set to be a key text within the science of the individual, a multi-disciplinary field drawing upon recent scientific and mathematical findings to demonstrate that it is simply not possible to draw meaningful conclusions about human beings using statistical averages.

“For more than a century, this average-size-fits-all model has ignored our individuality and failed to recognise talent,” Rose says.

By designing the cockpit for the average man, they were designing jets for nobody.

The implications of abandoning averages are far-reaching, for children within the educational system, for employees and employers, and for our personal relationships.

It was a Belgian astronomer and statistician, Adolphe Quetelet, who invented the idea of the “average man” in 1835, characterised by the mean values of measured variables (physical and intellectual) that follow a normal distribution.

“When I say ‘average doesn’t exist’, this is no bumper-sticker slogan,” says Rose.

“It is mathematical fact, with enormous practical implications.”

The uncomfortable truth about conformity

Rose cites the example of the US Air Force, which in the 1950s began investigating why pilots were struggling to control their planes.

It turned out not to be pilot error or poor training, but the way in which cockpits were designed: around the body shape of the “average” pilot of the 1920s.

With the help of a Harvard College graduate named Lieutenant Gilbert Daniels, the airforce measured 4000 pilots on 10 dimensions of size – such as torso length and chest circumference – assuming that most pilots would be within the average range for most dimensions, and many would perfectly fit all 10.

The results were staggering: a grand total of zero pilots fitted this average size profile on all 10 counts.

Even when just three dimensions were used, only 3.5 per cent of the pilots were “average”.

Instead, most had what Rose calls a “jagged profile”, varying greatly on all dimensions.

“By designing the cockpit for the average man, they were designing jets for nobody,” says Rose.

The airforce responded by abandoning the idea of “designing-to-average” physical stature, demanding that manufacturers instead adopt design that was adjustable for extremes of size, fitting both the tallest or the shortest, and those with wide or narrow chests.

This led to innovations we now take for granted, such as adjustable seats.

To Rose’s mind, averages have failed us spectacularly – especially in our educational institutions.

“We might not all need to fit into a cockpit, but we have had to fit into a classroom,” he says.

And we have yet to see the equivalent of adjustable seating within education.

Students are grouped in classes based on chronological age; curriculums and Oxford textbooks are written to be “age-appropriate”; standardised assessments, such as SATs, GCSEs or IQ tests, are also based on a comparison to a hypothetical average student.

We are addicted to averages, Rose says, “because it promises to simplify and quantify something complicated and unquantifiable: human potential”.

Potential catastrophe

Today, our entire education system is based on the average learner, when there is no such thing.

“So schools fail at what they’re supposed to do – recognise and nurture talent,” says Rose.

He knows this first-hand.

He grew up in Ogden, Utah, a rural part of America where, he says, “conformity was the most prized thing of all”. By the age of eight, he was painfully aware that he didn’t fit in.

“You are never more judged than you are in school,” says Rose.

His behaviour wasn’t particularly dramatic, “just a little hyperactive and a bit forgetful” but the bad report cards rolled in, he became isolated socially, and he hated school, eventually dropping out of high school.

“I totally flunked,” he says. He was left convinced that he was lazy, stupid and unteachable.

But when he left that 10th dead-end job at 21, he received some life-changing advice from his father, who had worked his way up from being a mechanic to a mechanical engineer.

“He told me I wasn’t lazy or stupid, I just needed a job that would interest me and where I’d thrive – but that he couldn’t see this happening until I had an education,” says Rose.

These words hit home, and he eventually enrolled at the local college, Weber State University, where he ignored the guidance counsellor’s advice to take classes he’d failed at school, instead taking advanced classes in subjects that interested him, like economics.

He kept a diary, noting the specific context in which he found learning challenging – variables such as a particular teacher, environment or skill set – and began to recognise patterns, gradually compiling his very own “jagged profile” as a learner.

And it worked: Rose graduated as the top student of the class, with straight As, the honour student of the year.

Originally set on neurology, he found himself gripped by psychology – not least because he was only partially convinced by the studies that developmental psychology is built on.

The science of individuality

“Psychological studies all seemed to miss the important details that made me able to succeed,” he explains.

“That’s when I became interested in the science of individuality.”

In 2001, Harvard had just created its mind, brain and education program, when Rose took his doctorate there. Today, he’s director of it, and The End of Average is the culmination of years of research, as well as his personal experience of a system that failed him.

“Teachers and parents know that our public education systems aren’t really working, and companies know that HR departments don’t work in terms of finding talent,” he says.

The problem, according to Rose, is how we see human beings.

“We need to realise that there is no such thing as an average human, and stop measuring ourselves according to arbitrary yardsticks with no real basis in human nature.”

The exciting development, for Rose, is that we now have the technology to facilitate more flexible learning and assessments in schools, such as translation apps or voice recognition technology.