Software runs my life

Tag: real estate

Is there money in producing content?



Online media is growing up. All the big media players (News, Fairfax etc.) are currently fighting it out with the new kids on the block, online pure plays (Google, Microsoft, etc.). The prize is the rapidly growing pool of online advertising revenue, predicted to pass the US$50 billion mark next year. Historically the provider with the most content has attracted the most consumers, in turn attracting the most customers. Eventually this network effect lead to breakaway market leaders establishing dominance and gradually raising the market barriers of entry. Holding all the content was a licence to print money.

Slowly general search tools like Google and Bing, as well as vertical specific search sites like Zillow, started gaining momentum. They established themselves as “middle men”, generating advertising while helping people more efficiently find the content they were looking for. They were not interested in hosting or contributing content, but rather focused on the delivery of that content. They realised that the front-end distribution is where the money is at, not at the back-end creating content. Google in particular understands this, and the publishers do not. The publishers hate that Google News provides a beautiful user interface to access their content easily and for free, yet despite their threats they do not block Google’s bots because they need a strong online delivery channel and half their traffic comes from search engines.

This style of reluctant symbiotic relationship also appears outside news content, it is extending further into real estate and videos to name just a few. Microsoft are attempting to flip the relationship by making Bing Video index Google’s YouTube content and Google Maps is indexing real estate content.

The big media content creators have recognised one thing at least, for the partnership to work each participant has to have a stake in it’s success (or failure). Licencing deals, share stakes and other structures are occurring left, right and centre as the various players align themselves. This “sorting out” period has amusing side effects, like media companies being on both sides of the legal fence. Eventually the flurry of deals will subside and the media companies will realise that YouTube is no different to their old printing press and delivery operation, it is a necessary distribution channel that takes a commission. If your printing press operator decided to make your boring black and white rag and turn it into a glossy high end publication that successfully retailed at twice the price (despite having the same content) then good luck to them, in the end you benefit from a more valuable distribution channel.

For now we are faced with more sabre rattling by the media companies, constant partnership renegotiation’s and declining print revenues. As with any market forces, the digital media market will eventually reach an unsteady equilibrium. Some sort of duopoly with Google/Microsoft as the distribution channels, and the old media companies aligned behind them as the content creators. It is unlikely that the print rivers of gold will be seen in one place again, but sharing these rivers over a wider and more competitive landscape will benefit consumers. Sooner or later content producers will realise that revenue is a balance between consumption price and volume, withholding content only encourages piracy and other forces that undermine their progress to a fair and efficient new distribution channel.

Interest Rate Experts

Today the Reserve Bank of Australia cut interest rates by 0.75% (0.25% more than the expected 0.5%. That represents a 200 basis point cut over just the last three months.

When reading an article on the cut on, I noticed the “Related Coverage” sidebar. Every single piece of news has a different guess; some thought rates would go up, some down and some the same. In short, no-one really has any idea. How can these people be called experts? Is it really that the conflicting factors of inflation, house prices, consumer spending, the global stockmarkets and employment (to name just a few) are too hard to compare and weigh up? Maybe, but these ‘experts’ get paid for what they do! Or perhaps the experts are just journalists looking to create sensational headlines from titbits of superficial knowledge?

I am inclined to think that journalists play a very large role in the economic crisis, and that the severe fluctuations in the market are driven by fear generated by ‘experts’ and delivered to ‘mum and dad’ and ‘out of their depth’ investors.

Realestate Dramas

Domain Down

It is all happening in the world of Australian Online RealEstate tonight! The board have announced the immediate departure of their long serving (since 2001) CEO, Simon Baker. This was a huge surprise, although the fact that he sent out about 50 LinkedIn recommendation requests to people (myself included) late Friday night should have been a bit of a warning. Anyway at least Domain isn’t having the last laugh, their website is currently completely broken, simply stating that “an unexpected error has occurred”. I would say their support team are going to wake up to hundreds of thousands of error emails and a big headache tomorrow.

Renovation Advice

Renovate Homepage

I emailed the Expert at the other day, hoping to get some advice about a property that I was interested in. I never expected to get a reply, but I got one within the week! I thought that was the end of it, but I found today by chance that it has been posted on their website.

I decided not to take the chance on the property, which was a gutting decision to make. It came back to me this week, when the offer I had had accepted was also accepted with another party. Back to the drawing board, although at least the market is not getting any better.

Mortgage Stress

How much of your income goes to pay the mortgage?
It is not hard to find doomsday predictions for the Real Estate market. Sites such as Who Crashed the Economy are a collation of tales of pending economic (and particularly housing sector) destruction. There is a trend that indicates mortgage stress and housing price falls are limited to the outer suburbs of Sydney, primarily the west and south-west. Even when you analyse mortgage stress on a nationwide basis these suburbs keep appearing.

So I guess the question is whether this effect will be seen in the more blue label, inner-city suburbs. Most experts seem to think that the next 9 months or so are a good time to buy; if you have some savings tucked away and can ride out high interest rates in the short term. The next official inflation reading comes out on July 23, so a change in rates after this time is entirely possible. Whether the increases end there, or another ones comes in November, is anyones guess. I will be watching these news stories pretty closely, as it seems most of Australia is.

I was prepared to bid at an auction on the weekend, but it sold for $100k (15%) more than the quoted price range, and $50k less than what turned out to be the vendor’s target selling price! Clearly there is still a lot of dodgy underquoting practices from certain agents and turbulent pricing changes are still shaking themselves out in this market. I just have to hang in there and hope (as evil as it is) that a foreclosure can deliver me a reasonably priced dream home.

First Home Buyers Grant

The NSW Government introduced the First Home Buyer’s Grant Scheme back in the year 2000. The $7000 cash bonus is nice, but it is the stamp duty concession that really helps out. The stamp duty calculator shows that the duty on a $500k home drops from $18,170 to a tiny $180 if you are a first home buyer, a huge saving of $17,990. This saving deteriorates pro-rata however as the price of the home approaches $600k, at which point it becomes unavailable. Means testing by this method is all well and good, as long as the means test is indexed. Back in 2000 property prices were significantly lower than they are today, as shown by the Reserve Bank’s own property price index graph from the May 2008 Regional Economic Performance Report:

Graph of Australian House Prices 2000 to 2008

This graph clearly shows that property prices have at least doubled in every state in the last 8 years, the same time period the grant scheme has been running. For 8 years of rapid growth the threshold has remained unchanged. NSW is actually the worst state for this, with an Age article citing:

Mortgage repayments account for 29.1% of total first home-buyer income, a one percentage point increase over the December (2007) quarter.

Adding to the cost of housing are taxes and charges, which added $110,000-$115,000 to the typical house and land package in Sydney, Mr Lamont said. In Victoria, that figure is about $57,000.

Surely the NSW Government should be keeping more of a finger on the pulse rather than making huge profits from Stamp Duty. The Federal Government is a little closer with their savings accounts, but $5000 a year is not going to get you a decent deposit anytime soon.

How to buy a house

My favourite house in CroydonYou thought buying a car was complicated! For anyone wanting a checklist (who doesn’t love a checklist) here is basically mine so far:

  • Open inspection
  • Family inspection / Attempted building inspection
  • Check public transport timetables and/or traffic
  • Pest inspection
  • Building inspection
  • Quotes on repairs and alterations
  • Check heritage listing
  • Check zoning for the area and surrounds
  • Council check for previous development applications* (see below)
  • Council check for proposed development applications
  • Check council codes to see if any planned modifications will have a chance of approval
  • Survey inspection and verification (if there is even one post-1881)
  • Sewerage and other utility diagrams and connections (and possibly easements)
  • Solicitor contract inspection
  • Prepare a solicitor/conveyancer to do the conveyancing
  • Alteration of contract terms (land tax, mistakes, settlement time)
  • Talk to mortgage providers to get pre-approval and negotiate rates
  • Understand and compare loan rates, structures, flexibility and features
  • Decide whether rates are going up or down over the next 30 years
  • Decide whether house prices in the city, suburb and street are going up or down over the next 10 years
  • Organising a cheque to pay the deposit on the day of the auction

Exhausting and risk-laden probably sums it up the best. I don’t know how some people move house every year or two!

* On another note Burwood Council (and most impressively most councils) has an online DA system. There is a very simple little hack to get development applications from further back in time. That highly disguised “num_days” parameter can be changed to whatever you like. Maybe 1800 works well?

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