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The hidden savings of solar you may not have considered

Presented by UPowr

Households powered by solar are set to be hot property in the years to come. 

The benefits of having household solar panels are far-reaching, beyond even what you might expect.

We all hope to save a few dollars on energy bills, but you may find more financial value (and beyond!) with the right energy solution.

We quizzed Stu Philpot, CEO of UPowr – Australia’s premiere digital-first, solar design and installation company – on exactly what solar can do for you, from household savings to future pay-offs.

Financial savings on your power bill

Of course, the first thing most people want to know about household solar is if it will shave money off their electricity bill – and, if so, how much?

Homes with solar, like this one, can be financially beneficial over time. Picture: realestate.com.au/buy

Precise savings vary according to the size of your solar system and your household’s energy use. However, UPowr reports an average saving of around $1065 per year.

To evaluate the savings though, we first have to calculate the costs:

The costs of solar

“A good yardstick for cost is around $1 per Watt so, a 5kW solar pv system costs around $5000,” says Philpot.

“A solar and battery system, depending on the type of battery, is probably just over $10,000 at the moment.”

Further to that point, there are a range of government incentive programs in the form of grants or subsidies that can contribute to cutting these upfront costs.

The savings of solar

As mentioned, the average savings are just over $1000, but the goal of UPowr is to avoid generalisations and provide concrete data.

UPowr has devised technology that, via a data analysis of various aspects of your home and energy use, can provide a more exact estimate before you get your system.

How much you can save is dependent on how you consume energy at home. It certainly helps to have an estimate up front. Picture: Pexels

“We don’t sit there and say ‘you’re going to save $2000 per year’, then you go through the journey and it turns out to only be $400,” Philpot assures.

While previously projected estimates were limited, you can now gauge your savings before you commit.

“We take all available data from the customer to create a personalised quote. We look at the customers physical property, taking into consideration shading, their personal energy consumption and future energy tariffs. We combine this with consideration of the specific assets [panels, batteries etc] we’re looking to install.”

Planning for the future of electric homes

If you’re weighing up the pros and cons of investing in solar, Philpot says it’s vital to think long term. The future of energy sources and consumption is not going to be the same as it is now.

If electric cars are the future, you may want a solar-powered charging station at home, right? Picture: Pexels


“The electrification of the home is happening,” he begins. “Looking forward, we’re all going to have household solar systems. You’re going to have a battery, an electric vehicle – which means you’ll want to have electric vehicle charging infrastructure – and you’re probably going to have electric hot water too.

“If you’re a home owner, [investing in solar] is the first step towards future-proofing your home.”

Protecting against inflation

Another forward-thinking aspect to consider is the rising price of electricity and gas. According to the government, the cost of electricity increased by more than 100% from 2009 to 2019. This was one of the highest price increases of a consumer good in Australia over that decade, second only to tobacco.

“[By having household solar], you’re hedging against energy price inflation as well,” Philpot says. “The cost of energy typically trends upwards, above inflation and we hope eventually you have a zero dollar energy bill.”

A cash-positive investment

Another way to think about solar as an investment is that it is ‘cash positive’. Unlike other large expenses in your life, solar does offer a reasonable financial return to both cover and exceed the upfront cost.

“When you buy a car for $30,000, at the end of five years, that car might only be worth $10,000,” Philpot explains.

“So if you invest $5000 [in solar], it’s going to be generating revenue for the home for a warranted period of 10 years or more – and [solar systems] typically last more than 10 years. So, it’s going to be cash flow-positive at a point in time.”

New homes in Canberra, like this one, must meet minimum energy efficiency standards. Picture: realestate.com.au/buy

Not only is it ‘cash positive’ in terms of bills, but chances are it will add to the value of your home down the track.

With buyers increasingly looking for sustainable features in potential properties, solar has become a notable feature for many sellers and agents.

In fact, in Canberra, there are now energy efficiency minimum standards for new homes and it is compulsory for sellers to disclose a home’s energy efficiency credentials.

Save the environment

Ultimately, the value of a solar system shouldn’t only be measured in dollar savings per annum. The real value is in saving our non-renewable, natural resources, preserving our earth, and protecting people by warding off the ongoing threats of climate change. In keeping with his style, Philpot manages to put an exact figure on this as well.

“On the average solar system, you’re probably looking at about six tonnes of carbon abatement a year, which is pretty significant,” he explains.

“Over 10 years, you can save 60 tonnes of carbon. You’re starting to really position the home in a different way and if your home is becoming more electric, then the benefits are only going to increase from there.

“Ultimately, this is a great way for a family to get involved in a bigger mission for the environment but also do something positive for themselves from a cashflow perspective. It’s the time do something.”

CategoriesNews

The house prices that are still rising: How inflation is blowing out building costs

Tawar Razaghi July 19, 2022

Property prices may be falling for the established housing market, but new homes are bucking the trend and have become the canary in the coal mine, as far as inflation goes.

Almost every category of building materials has become more expensive. Steel products are leading the way, jumping 42.1 per cent in the year ending March 2022, Australian Bureau of Statistics figures show.

It was followed by timber, board and joinery, which jumped 20.6 per cent in the same period.

The soaring costs are a sharp turnaround and at odds with the falling prices of established housing market thanks to the sheer two-year strong demand for new homes, in the face of ongoing limits on materials and labour to build a house.

It all began when the majority of households pumped almost any spare dollar into their homes where they bunkered down once they realised they could hold on to their jobs during the pandemic and government support in the form of JobKeeper flowed through, as well as spending initiatives such as HomeBuilder.

As a result, the residential construction industry became the canary in the inflationary coal mine, according to Denita Wawn, chief executive of Master Builders Australia.

“It’s been a rollercoaster … two years ago, contracts were being terminated because everybody thought they would lose their job. All of a sudden, JobKeeper and HomeBuilder came along and people weren’t travelling, the building industry went from no work to too much work,” Wawn said.

Australians, who typically spend $55 billion a year travelling overseas, found themselves cooped up at home with cash to spare, she said.

“It had to go somewhere, so people were spending it on their homes,” Wawn said. “We were a bit of a canary in the inflationary coal mine. Inflation hit us hard 12 months ago.”

If Australians did not sign up to build a new home, they at least spent money improving it in some way, as shown by record building approvals and renovation spend.

The Housing Industry Association chief economist Tim Reardon said the rise of construction costs was twofold.

First was the sheer pickup in the demand for houses in speed and volume, Reardon said, then came the constraints on supply and labour that failed to meet that unprecedented demand, which was compounded by the fact most other developed economies had the same housing boom at the same time.

Before the pandemic, the construction of freestanding houses was slowing, with about 105,000 being built, the Association’s figures show.

By the end of 2021, that had increased by almost 50 per cent. That has now jumped to 80 per cent more homes under construction than pre-COVID, Reardon said.

“We have seen a 19 per cent increase in the value of the average home approved in Australia over the past 12 months to May,” he said.

“It’s been very difficult for builders to price the construction of a home … given the rapid increase in prices and builders typically bear that risk, which has been a challenging time for builders and businesses.”

At one point, when Canberra went into a snap two-week lockdown, it took just five days for roofing battens to run out on the entire east coast, as the city was the only location the product was produced, Reardon said.

“It’s those additional shocks that disrupted the efficient operations of the industry and have added costs throughout the supply chain. All those factors compound through, and those costs are borne through by those building new homes.”

Brick manufacturing locally has increased, but ramping up production takes time to commission new plants and train new staff, he said.

Home building in the next 12 months will remain at capacity, but the number of approvals will slow down as rising rates and the construction costs start to bite households, Reardon said.

“The end outcome is the increased cost of new homes will slow the demand for new homes, compounding that is the increase in the cash rate,” he said.

Jon Stoddart, managing director of Stoddart group, Australia’s leading supplier and installer of products to the residential building industry, said the sector has been impacted at every step of the building process, compounding inflationary pressures.

“First there was the home stimulus grant. We sold a bucketload of houses then freight got dearer, then worldwide timber took off. To top that off, a lot of the timber that comes out of Russia was banned, that limited that supply,” Stoddart said, adding that they resorted to using steel frames as an alternative.

But during recent floods train lines used to transport heavy steel loads were destroyed, disrupting the alternative supply chain once again, as well as a labour shortage as insurance companies pay top dollar to complete urgent flood claim works, Stoddart said.

“If you can think of anything that can go wrong, it’s gone wrong. It’s not just one thing that’s occurred, it’s a multitude of things that have occurred,” he said.

“There is nobody to blame and the builders have suffered. They’re stuck on fixed-priced contracts and you’re seeing builders go broke.

“I don’t think anybody has done well out of this, whether it’s the builder, homeowner, supplier or the contractor.” 

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5 Reasons Why Interest Rate-Cuts Are Already Around The Corner

TYLER DURDEN JUL 22, 2022

Inflation rates are currently climbing to one multi-decade high after another. And leading central banks are responding by raising interest rates at an ever-increasing rate.

In mid-July the Bank of Canada raised its key interest rate by an astounding 100 basis points, to 2.5%, after the Federal Reserve hiked rates by 75 basis points to the target range of 1.5%–1.75% in June. In an unexpected move, the SNB also responded in mid-June by raising rates by 50 basis points to -0.25%. And another rate hike of this magnitude, perhaps even by 75 basis points, is planned. Only the ECB is still pretending that inflation is not a problem.

However, given the record high inflation, real interest rates are still clearly negative, giving the impression that the current global cycle of interest rate hikes is far from reaching its end.

But this consensus assessment will prove to be wrong . The current cycle of interest rate hikes could go down in history as the shortest and weakest in recent decades. Here’s why.

1. Economic activity is slowing.

No matter what data is analyzed, the economic outlook is increasingly gloomy.

The commodity markets, for example, have retreated significantly from their interim highs up to mid-July. One of the leading economic indicators par excellence, copper, has lost around 35% from its high in March. Aluminum is down by around 40%, nickel by around 55%, steel by more than 50%, lumber by around 60%, and oil by more than 20%.  

US consumer confidence is at the lowest level in its 70-year reporting history. Neither the Vietnam War, nor the Arab oil embargo of the 1970s and early 1980s, nor any stock market crash, nor the Iraq War, nor the bursting of the tech bubble, nor the Great Financial Crisis of 2008, nor the Covid lockdowns have been able to bring consumer confidence so desperately to its knees.

Technically, the US is already in recession. After the US economy contracted by 1.6% in the first quarter of 2022, as of mid-July the Federal Reserve Bank of Atlanta’s real-time GDP indicator, “GDP Now”, stands at an annualized -1.5% for the second quarter.

Growth-rate projections are being revised downward around the world. Even if taking economic developments into account is not necessarily part of a central bank’s mandate, central banks do have an impact on inflation trends. Interest rate hikes in an environment of low or even negative economic growth have an additional dampening effect on the economy.

2. Before the pandemic economic growth was already sluggish.

People forget quickly, especially after such drastic events as the Covid-19 pandemic, when, due to statistical effects, there were dream growth rates in 2021 and 2022. These above-average growth rates – politicians and the media spoke of an economic miracle in Italy, for example – were exploited by the politicians to create a positive atmosphere. However, this flash in the pan from statistical effects fizzled out very quickly.

After all, there are no structural reasons why the state of the global economy should be better now than before the outbreak of the pandemic. And back then, in the second half of 2019, the Federal Reserve had attempted to combat the cooling economy with no fewer than three interest rate cuts.

In fact, on top of the tensions existing in late 2019 – chief among them the trade war between the US and China – a host of additional burdening factors has emerged: the distortions of the pandemic, which are far from being overcome, including persistent supply chain problems and labor market imbalances; the war in Ukraine; significantly higher sovereign debt ratios; the real estate crisis in China; the pronounced emerging energy crisis; likely food shortages; and associated political destabilization. But long-term developments, such as striking demographic changes, are also having an increasingly significant impact. Even in the comparatively young US, the working age population (15-64 years) shrank for the first time in 2019.

So even if the global economy were able to return to the growth levels seen before the pandemic, this would be a continuation of a fundamental downward trend. The Federal Reserve’s three rate cuts in the second half of 2019 attempted to combat this downward trend.

3. Interest rate increases are hardly digestible for the highly indebted countries.

In addition to the weakening global economy, another development stands against significant interest rate hikes. In the 1970s, record-high inflation was fought with strong interest rate hikes. By March 1980 the Federal Reserve had raised its key interest rate to 20%.

Back then, however, debt was significantly lower than it is today. In the US, government debt in the 1970s was around 35% of GDP; today it is about 125%. But the other two sectors of the economy also had lower debt levels back then. Corporate debt fluctuated around 50% of GDP in the 1970s; today it is almost 80%. Household debt increased slightly in the 1970s but was less than 50% of GDP. Today, by contrast, household debt stands at more than 75% of GDP. At more than 275% of GDP, US total debt today is more than twice as high as in the 1970s.

As a result, interest service will soon become a problem for the United States, as confirmed by calculations of the Congressional Budget Office. By 2024, interest service will still ease slightly from the current 1.4% of GDP to 1.1%, despite huge budget deficits in 2020 and 2021 of more than 10% each. Starting in 2024, though, interest expense as a share of GDP begins to rise, reaching 8.6% in 2051 in the CBO’s baseline scenario. This would require just under one-third of tax revenues to be spent on interest service alone.

This calculation is based on the assumption that the yield on 10-year US Treasuries increases to 3.3% in 2030 and to 4.9% in 2050. This would be a rather moderate increase by historical standards. In 2001, the 10-year US Treasury bond yielded 5.0%, and in 1991 it was as high as 7.9%. Assuming a higher average interest rate on government debt of 2.7% in 2030 and 6.6% in 2050, instead of 2.2% and 4.6% respectively in the baseline scenario, we would end up with an interest service of 15.8% of GDP. The national debt would thereby increase to 260% by 2051, and these calculations do not include the budgeted spending of the second major pandemic support program, the American Rescue Plan, amounting to USD 1.9trn, or nearly 10% of GDP. The assumed real growth rates of just over 1.6% per year on average may also prove too optimistic and exacerbate the problem.

The situation is no better in many countries around the world. While countries such as Greece and Italy are suffering first and foremost from their high levels of government debt, in Scandinavia and Switzerland it is private households and/or the corporate sector that would suffer from interest rate hikes due to their high levels of debt.

The fact that in this macroeconomic view France, with a total debt of almost 350% of GDP, even dwarfs Greece, may be the obvious reason why Christine Lagarde, as ECB president, is acting so hesitantly.

4. Debt relief through inflation is counteracted by an increase in government spending.

It is one of the supposed standard wisdoms that states can deleverage themselves in phases of high inflation. However, this perfidious debt relief works only as long as government spending grows more slowly than the inflation rate. Increases in transfer payments below the inflation rate are thus a simple and obvious instrument for deleveraging through inflation, but at the expense of the weaker members of society. To put it bluntly, transfer recipients restructure the state budget by being forced to forego consumption as a result of a real decline in transfer payments.

However, this automatism is not as strong as it may seem at first glance. Statutory inflation adjustments may diminish this effect. In the US, for example, the automatic increase in payments of Old-Age, Survivors and Disability Insurance (OASDI) in line with the CPI is required by law. Similarly, additional spending or tax cuts to combat the effects of inflation lessen the debt-reduction effect of inflation. Numerous countries have already adopted measures designed to relieve low-income earners and industry of the considerable additional burden caused by the sharp rise in inflation.

Above a certain level of inflation, the debt-relief effect of inflation on government budgets is even reversed. This is because real tax revenues erode with rising inflation, since the time at which tax liabilities are established and the time at which they are paid can differ significantly for some high-yielding types of tax, such as income tax. This fiscally significant phenomenon is known as the Tanzi effect.

Calculations by the German DZ Bank show that using the GDP deflator as an inflation indicator, inflation of 3% per year would significantly reduce the debt ratio in those countries that have a low primary deficit or possibly even a primary surplus and a comparatively high debt ratio. Italian government debt could thus fall by 20 percentage points or 13% to a still high 136% of GDP by 2026. With an inflation rate of 5%, which is more in line with current reality, the decline would amount to 32 percentage points or around 20%. The corresponding figures for Germany show a decline in public debt from 69% to 58% in 2026 in the 3% scenario and to 53% in the 5% scenario. This would put German government debt well below the 60% Maastricht debt ceiling again. But, as we have said, this deleveraging effect of inflation presupposes that the states continue to achieve a primary surplus.

But the argument against this approach is that countless packages of measures to combat inflationary consequences have already been adopted – and many more will follow. Consequently, the (government) debt burden will not decline markedly and the scope for interest rate hikes will remain limited.

The extent to which short-term thinking dominates today and reduces government’s potential gains through inflation is currently evident in Germany. In order to profit from the low level of inflation, the finance ministers of previous governments had increasingly relied on inflation-indexed bonds. Germany is now being presented with the bill. Although inflation-indexed bonds account for only 5% of the federal government’s total debt, their share of interest payments will be around 25% in 2023. Next year alone, there will be – deficit-increasing – additional expenditures of more than 7bn EUR.

5. Markets are already pricing in interest rate cuts.

Markets have already realized that central banks have little room for maneuver. For the US, markets currently expect the first interest rate cuts, averaging 60 basis points, as early as the second quarter of 2023.

The cycle of interest rate hikes will therefore come to an end before it has really begun.

Conclusion

Negative real interest rates will stay with us for a long time and thus create a positive environment for gold. Because of the high level of debt, interest rates that actually fight inflation would lead directly to a veritable debt crisis as well as trigger a deep recession. No government in the world would survive such an economic horror scenario. Even if inflation also causes governments to falter, the Ukraine war provides a politically plausible excuse.

For the euro zone, the situation for gold looks even more positive. The extremely hesitant approach of the ECB has even pushed the euro below parity with the US dollar. The fundamental weakness of the euro has to a large extent compensated for the weakness of gold in recent weeks, and since the beginning of the year gold in euro terms has therefore remained strongly positive. 

 
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The major shift in favour of QLD property buyers

Samantha Healy, 14 Jul 2022

A major sign that the property market might finally be turning back in favour of weary buyers has been revealed, with the number of dwellings being listed for sale in Queensland defying the usual winter slowdown.

The PropTrack Listings Report June 2022 has revealed that the number of new listings hitting the market in Brisbane soared 8.4 per cent in June compared to the same time last year, and was up 11.4 per cent annually.

And the number of new listings in regional Queensland also increased by 11.5 per cent in June, the busiest June period since 2014, while new listings were up 13.9 per cent over 12 months.

But while the total stock on the market saw an uplift during June, supply remained down on a year-on-year basis.

Nationally, new listings were down 3.1 per cent in June but were up 8.5 per cent over 12 months, the report revealed.

“June was a strong month relative to typical conditions,” PropTrack economist and report author Angus Moore said.

“There has been a brisk pace of new listings, with more new listings nationally across the first half of the year than during any year since 2015.

“While conditions are likely to slow a little as we continue through the typically quieter winter period, activity has remained robust in many markets.

“Though selling conditions broadly have begun to temper after a very strong spring 2021 and early 2022, fundamental drivers of demand remain strong, with unemployment low, wages growth expected to pick up over this year, and international migration now returning.”

Mr Moore said a combination of factors could be behind the uptick in listings, with the prospect of further rate rises and a drop in values also likely to be behind the rush to sell.

“Interest rate roses are likely weighing on both buyers and sellers,” he said.

“How far and how fast they move will be critical to what happens in the market.

“It is still tough (for buyers) in Brisbane but there is more choice now, and less competition so that’s potentially good news for buyers coming into spring.”

The Reserve Bank of Australia (RBA) hiked rates a further 0.5 percentage points on July 5, lifting the cash rate to 1.35 per cent.

That came after soaring inflation forced the RBA to end the record low run at 0.1 per cent in May, and consecutively hike up rates by 0.25 per cent (May) and 0.5 per cent (June). And those rate rises are unlikely to stop, or come down, anytime soon, according to many economists.

It comes as property values in Brisbane fell almost 0.1 per cent in June – the first drop since the start of the pandemic.

Mr Moore said there was little doubt that doomsday predictions of double-digit drops in property values were weighing on the minds of sellers.

But he added that similar predictions of a price crash at the state of the pandemic had not only failed to materialise, the exact opposite occurred, with extraordinary growth in prices almost everywhere.

“Finally, after growth hit multi-decade highs in 2021, home prices are falling in many cities,” he said.

“That (interest rate rises) will place greater downward pressure on prices.

“But for sellers, anyone who bought before the pandemic, they are still sitting on substantial equity.”

There are over 5600 properties listed for sale across the Greater Brisbane region, according to realestate.com.au.

Up north, buyers have over 1000 properties to browse in the Cairns region, and there are more that 1700 listed across the Townsville region.

On the Gold Coast and Sunshine Coast there are over 4300 and 2700 respectively, ranging from land and units to houses and duplexes.

Across Queensland as a whole, there are over 38,000 current listings, with properties under offer excluded. 

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Top 20 NSW suburbs where you can save thousands by refinancing

Kate McIntyre, 13 Jul 2022

Homeowners in a number of suburbs could save hundreds of thousands of dollars by refinancing to a lower rate now ahead of further rate rises, new research shows.

In contrast, those who sit idle could find themselves “mortgage prisoners” as interest rates climb even further.

The research, commissioned by Reduce Home Loans, identified 20 “mortgage belt” suburbs in NSW where homeowners could save thousands off the life of their home loans by reducing their interest rate by 175 basis points. The study assumed homeowners purchased in 2019 with a 10 per cent deposit and were refinancing from 4.75 per cent down to 3 per cent.

Kellyville, in Sydney’s north west, topped the ranking with the highest number of mortgages per suburb.

The report found borrowers there could save as much as $295,560 by refinancing down to a 3 per cent rate.

The regional centres of Dubbo and Orange were next on the list, with borrowers there potentially saving $98,405 and $110,922 respectively.

Homeowners in the Hills District stood to save the most by refinancing.

Borrowers in Castle Hill could potentially save a whopping $361,427 if they refinanced to an interest rate of 3 per cent, while borrowers in Baulkham Hills were estimated to save about $295,391.

Reduce Home Loans general manager Josh Beitz said borrowers about to come off a fixed term period should consider their options carefully.

“Some borrowers who have reverted, or will soon revert, from a fixed to a variable loan might

find themselves on a higher interest rate, which, of course, would be concerning,” he said.

“It’s important for those borrowers that can afford the rollover rate not to be complacent.”

“The Reserve Bank is likely to keep increasing the cash rate, which will translate into much higher mortgage rates.”

He said some borrowers could find themselves trapped and unable to refinance once rates went past a certain point.

“Lenders always assess borrowers at higher interest rates, so as rates keep increasing,

people’s borrowing power will be reduced. As a result, many borrowers will be locked out of

refinancing,” he said.

“That’s why borrowers should seriously consider refinancing now to a comparable loan with

a lower interest rate – because as rates keep increasing, borrowers can become ‘mortgage

prisoners’ unable to escape spiralling interest rates.”

Top 20 mortgage belt suburbs where refinancers can save (suburb and total savings)

Kellyville $295,560

Dubbo $98,405

Orange $110,922

Castle Hill $361,427

Baulkham Hills $295,391

Blacktown $174,774

Glenmore Park $198,070

Port Macquarie $154,954

Quakers Hill $187,193

Goulburn $113,127

St Clair $179,778

The Ponds $270,671

Cranebrook $167,753

Greystanes $218,715

Armidale $94,359

Prestons $189,960

Glenwood $249,475

Oran Park $203,788

Engadine $237,792

Seven Hills $196,263

* Assumes borrowers have 27 years left on their mortgage and are refinancing from a 4.75% loan to a 3.00% loan.

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