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Interest Rates Hold Steady

RBA DECISION

Once again, the Reserve Bank of Australia (RBA) has maintained the current policy settings, leaving interest rates on hold for another month, aligning with plans to leave rates unchanged for the foreseeable future.

Dr Philip Lowe in his statement on the RBA’s decision has cited the global economy’s continued recovery from the pandemic and stronger than expected economic results locally– which are predicted to continue – particularly with unemployment falling to 5.6% in March as justification for the decision.

The RBA expects the unemployment rate to be at 5% by the end of 2021, and around 4.5% by the end of 2022.

On housing prices, and the recent boomtime results, Dr Lowe said,  “Housing markets have strengthened further, with prices rising in all major markets. Housing credit growth has picked up, with strong demand from owner-occupiers, especially first-home buyers.”

Yet despite positivity surrounding the market’s recovery, Dr Lowe followed with a warning, stating, “Given the environment of rising housing prices and low-interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained.”

The board also reiterated its commitment to “maintaining highly supportive monetary conditions to support a return to full employment in Australia and inflation consistent with the target,” Dr Lowe said.

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5 Hobart Homes Under $750,000

A lot has been written about the ‘mainland’ invasion of Tasmania’s major cities, with many on looking for a quieter, more socially distant slice of Australia in a post-pandemic world. Here, we’ve compiled five of the best listings under $750,000 in Hobart.

 

72 Begonia Street, Lindisfarne, TAS

Located in the ever-popular Hobart suburb of Lindisfarne, with views across the River Derwent arrives this immaculate home replete with modern style and conveniences.

Arriving with polished timber floorboards throughout the living spaces, with floor-to-ceiling windows framing the surrounds, comes an intelligent layout.

With polished timber floorboard through the living spaces and floor-to-ceiling windows framing the surrounds arrives the dining and contemporary kitchen all warmed by a central wood-heater.

Three bedrooms provide cost accommodation with the master suite featuring mirrored built-in wardrobes. The other two bedrooms are north-facing and capture stunning views of the river.

The listing is with Peterswald for property, offers over $645,000; peterswald.com.au

 

272 Park Street, North Hobart TAS

Photo: Courtesy St Andrews Estate.

 

An irresistible blend of character charm and modern amenity comes this North Hobart home.

The recently refurbished, circa – 1920, home features a new roof, new kitchen, bathroom and laundry fit-outs, new carpets, light fittings, internal doors and landscaping.

The accommodation comprises an entry foyer, three double bedrooms, lounge room, sleek new kitchen, combined designer bathroom-laundry and a separate toilet.

Conveniently located a short distance away from bustling North Hobart shops, Friends’ School, Queens Domain recreational reserve and more, it’s an ideal spot to start a family.

The listing is with St Andrews Estate Agents, taking offers over $725,000; standrews.estate

 

6 Supply Court, Oakdowns, TAS

The recently built home, 20-minutes outside of Hobart’s CBD brings together open living spaces, plenty of sunlight and connection to outdoor entertaining areas.

With timber finishes throughout, the spacious 4-bedroom, 2-bathroom, 3-car garage home is thoughtfully designed.

The residence sees a kitchen with an abundance of storage and workspace, as well as room for casual dining. Elsewhere the oversized windows stream light through the home while the 4-bedrooms, with three including built-in storage. The master boasts a walk-in robe and ensuite.

Further, the outdoor entertaining areas are built to entertain, with large stacking doors leading to the rear deck.

The listing is with Nest Property Sandy Bay, offers over $595,000; nestproperty.com.au

 

7/69C Olinda Grove Mount Nelson TAS 7007

Photo: Courtesy of Knight Frank.

Conveniently located a five-minute drive from the Hobart CBD, and nearby to Hobart College, and Mount Nelson’s surrounds arrives this 4-bedroom, 3-bathroom, 2-car townhouse.

Spanning two levels, the heart of the home is located upstairs where an open plan kitchen, dining and living room showcase timber floors, tall pitched ceilings lit by oversized windows for plenty of natural light.

Also here, large glass sliding doors open to creates a seamless connection between the living room and sun-soaked deck.

Three bedrooms and two bathrooms are housed on the upper level, including the master suite with a beautifully updated ensuite and walk-in robe.

Downstairs sees a large rumpus, or teenagers retreat alongside a fourth bedroom and bathroom/laundry.

The listing is with Knight Frank Tasmania, offers over $695,000; knightfrank.com.au

1 Pirie Street, New Town, TAS

Photo: Courtesy Petrusma Property.

While yes, technically the listing is for offers over $775,000, we thought this property too good a buy not to include.

The Federation home is situated in a terrific location just outside the city of Hobart and boasts a private and sunny outdoor entertaining area and views of Mt Wellington.

Beyond the externals, the interiors see Tasmanian Oak floors, tall ceilings, ornate fretwork, chandelier lighting and ceiling roses. Elsewhere, the kitchen – fitted with concrete benchtops and qualities appliances including a Franke wall oven, hotplates and a Smeg dishwasher, adjoins a large concrete courtyard.

The home features 3 bedrooms, with the main fitted with a walk-in-robe, sleek ensuite bathroom, dual vanity, and spa bath and a decorative fireplace.

The listing is with Petrusma Property, around $775,000; petrusma.com.au

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TikTok Is the Place To Go for Financial Advice If You’re a Young Adult

TikTok is the place to go for new dances, viral taco recipes—and, now, financial advice.

The big benefit of TikTok is that it allows users to dole out and obtain information in short, easily digestible video bites, also called TikToks. And that can make unfamiliar, complex topics, such as those related to personal finance and investing, more palatable to a younger audience.

But can TikTok users, many of whom are in their teens, 20s or early 30s, trust the financial advice that is increasingly being offered on the social-media platform?

That advice runs the gamut, from general information about home buying or retirement savings to specific stock picks and investment ideas. Rob Shields, a 22-year-old, self-taught options trader who has more than 163,000 followers on TikTok, posts TikToks under the username stock_genius on topics such as popular stocks to watch, how to find good stocks and basic trading strategies.

Most times, TikTok users don’t even have to search for information that might appeal to them—it comes right to their feed based on factors such as their user profile and usage.

To be sure, TikTok isn’t the only social-media platform popular with young people that features financial advice. YouTube and Instagram carry videos with financial content as well. But TikTok is a hit with younger generations in part because of its quick-hit videos, easily navigated swiping functions and highly personalized content suggestions. And the numbers of young TikTok users viewing financial-related content on the platform of late have surged, a trend that many users and industry professionals expect to continue.

A survey conducted in late January by LendingTree’s MagnifyMoney unit shows about 41% of Gen Zers, those born roughly beginning in 1997 up until a few years ago, reported turning to TikTok for investment information within the past month, versus 15% of millennials, often categorized as those born between 1981 and 1996. Recent research from Greenlight, an allowance and debit-card app that recently launched a financial-education and trading arm, shows that 35% of respondents age 13 through 20 have turned to TikTok for personal-finance and investing advice.

“There are very few educational resources about personal finance that are accessible and compelling to young people,” says Tim Sheehan, co-founder and CEO of Greenlight. “So it isn’t surprising that kids are turning to social media. TikTok, in particular, provides quick, digestible content that can instantly capture your attention,” says Mr. Sheehan. However, he adds, “Misinformation dominates social media and it can be very difficult to discern the facts.”

Dana Eble, a 25-year-old public-relations professional in Detroit, says she likes the idea that she’s learning things on TikTok from people who are close to her age and don’t come across as judgmental or preachy about what she should be doing with her money. Many of the finance articles she sees online, she says, target people in their 40s and 50s and the advice isn’t always pertinent to her.

“A lot of people my age are living on a shoestring budget, and the advice on TikTok seems to match where younger people are in life,” says Ms. Eble. “TikTok doesn’t make me feel bad if I buy a Starbucks once a month.”

But some financial professionals and TikTok users themselves express concern about the accuracy of financial advice sometimes given on TikTok and a lack of transparency, in some cases, regarding the identities and qualifications of people giving the information. While some trained investment professionals post TikToks, there are other so-called social-media influencers who post about financial matters on TikTok who have little or no formal financial background. In some cases, it is hard to find a TikToker’s real name, and it can take legwork to figure out their qualifications or whether they have a personal financial motivation for promoting themselves on TikTok. What’s more, some TikToks contain misleading or wrong information, make overly rosy claims about investment potential or include overly broad statements that could lead to significant financial missteps, according to financial professionals and users who have come across these types of TikToks.

Content related to general budgeting, saving money, cutting expenses and making smarter purchasing decisions is pretty innocuous, says Brian Walsh, senior manager of financial planning at SoFi, an online personal-finance company that offers products like loans and investments as well as free financial advice. But Mr. Walsh says there are other TikToks that concern him, such as the handful he saw that claimed that a fail-proof way to invest is by mimicking the holdings of top-performing actively managed mutual funds. Such lists of holdings are only historical snapshots, Mr. Walsh says, and the technical factors that might have led a fund manager to purchase those stocks might have changed in the meantime.

Mr. Walsh says he also is bothered by TikToks he has seen that proffer advice about buying rental properties and leveraging the risk, and that encourage home buyers to put down as little as possible up front. While these strategies might be appropriate for some viewers, he says he is worried about the possibility of younger people—who might be more naive or trusting—blindly following overly broad advice and being harmed financially as a result.

For its part, TikTok, on its financial-related hashtag pages, warns users to be careful of the financial advice they see on the platform and to report behavior that might fall short of community guidelines. On its #fintok page, with more than 296 million views, it states, “Before following any financial advice, keep in mind that all investments involve risks and consider doing your own research.” The company places similar notes of caution on pages for terms such as #stocktips, #cryptotrading and others. TikTok also has consumer guidelines against fraud and scams, including multilevel marketing operations. In addition, many TikTokers add disclaimers to their profiles saying things like “my opinions” and “not advice.”

“TikTok aims to promote a welcoming atmosphere for people to learn and find entertainment,” a company spokesperson says. “We’ve seen our community embrace a range of enriching ideas and content, and we’re focused on supporting that with both creative tools and safety features to help that authenticity thrive.”

Potential concerns aside, many young people in their 20s and 30s say they find TikTok’s medium appealing and use it to help educate themselves about pertinent financial-related topics that they often haven’t learned in school or from their parents.

“Many millennials don’t want to sit through a 30-minute or an hour or full-day seminar on finance,” says Amanda Israel, a 35-year-old certified pediatric sleep consultant in Philadelphia, who uses TikTok to learn about various financial topics she’s unfamiliar with, such as teaching children to be savers, buying investment properties and business financing.

The platform is a good starting-off point for learning about topics such as budgeting and retirement, says Lindsey Tayne, a 23-year-old senior at Northeastern University in Boston. If something catches her eye on TikTok, she says she makes sure to read posters’ bios and Google the topics to learn more.

“It’s a very fun, easy way to digest and eat all this content up,” says Taylor Price, a 21-year-old influencer with one million TikTok followers. Ms. Price is also chief executive at TAP Intuit, a financial-education platform that focuses on Gen Z. Ms. Price, who majored in finance and management in college, posts on a variety of basic investing topics that many young people aren’t learning in school; recent subjects include debunking common money myths, renting vs. leasing, summer side hustles, her current investment strategy and how taxes work.

Before posting a money-related video, Ms. Price says she does “extensive research” about the topics. “However, just because I do my own research does not mean viewers shouldn’t do their own due diligence, too,” she adds.

Several TikTok users also say they’ve made financial decisions based on TikToks they’ve watched.

Kim Bayle, a 30-year-old footwear-company sales director in San Juan Capistrano, Calif., says she was recently inundated with TikToks about cryptocurrency and she decided to invest $100.

“I have no idea why I bought what I bought,” she says. “They just said buy ethereum, so I did. It feels kind of stupid saying that. But I find myself getting influenced on TikTok all the time.” Still, she says she feels comfortable with her small purchase. “Anything more than that, I probably would have been uncomfortable with it,” she says. She has also bought a number of stocks based on investment strategies she has seen on TikTok.

The best thing to do when considering advice seen on TikTok, experts say, is to double-check everything with a reputable source, such as a financial adviser or accountant, before acting. “If it sounds too good to be true, it usually is,” says Ivan Knauer, a securities enforcement and litigation attorney in Ballard Spahr’s Washington, D.C., office. “When you hear someone spouting their personal opinions from the TikTok mountaintop, you should take whatever they say with a hefty grain of salt.”

Several TikTok influencers say that young people should be encouraged to educate themselves financially and that they should not take influencers’ recommendations blindly. “It’s hard to tell what is real since there are so many people out there,” says Mr. Shields, the options trader and TikToker. While Mr. Shields feels confident in his expertise, he says others need to do their own research to make sure they are making solid financial choices for their circumstances. “Wouldn’t you want to research it yourself because it’s your money?” he asks. “I’m still a dude on the internet.”

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How Credit Cards Affect Our Brains

It’s been known for decades that credit cards encourage spending. But why that happens still isn’t entirely clear. New research offers some fresh insight into the causes—and how consumers might be manipulated in an increasingly cashless society.

Research on credit-card spending has tended toward the explanation that delaying payment removes a barrier to purchases in shoppers’ minds. A study published in February in Scientific Reports found evidence of another kind of trigger. Differences it found in brain activity between shoppers planning to use a credit card and those planning to buy with cash indicate that buying on credit doesn’t just ease shoppers’ inhibitions, it actively encourages purchases, the researchers say.

The upshot: When people are shopping with credit cards and see a product they like, the neural network in the brain that produces a sensation of reward perks up, which seems to create a craving to spend, says Sachin Banker, assistant professor at the University of Utah, who worked on the study as a Ph.D. student at the MIT Sloan School of Management.

“You’re basically feeling more reward when you shop with credit cards,” he says. “We don’t see that with cash. It was actually a very stark difference.”

Researchers used a form of magnetic resonance imaging to measure the brain activity of the study subjects as they participated in a shopping exercise. Each participant was shown a total of 84 everyday products over the course of three sessions and was asked whether they would buy each product at the stated price. Half the products were offered for purchase by credit card and half for purchase with cash. None of the products cost more than $50.

The differences in the shoppers’ brain activity support the hypothesis that after repeated credit-card purchases over time the brain learns to anticipate the rewards of credit-card shopping, according to the report. And that suggests that consumers could be conditioned to spend through the use of various sensory rewards in new payment systems, Dr. Banker says. For instance, with digital payments the use of particular sounds or vibrations on your smartphone when you make certain purchases but not others could, over time, teach your brain to anticipate rewards for buying specific products while you’re shopping.

Dr. Banker adds that further research could be done to see if the study’s theories hold true at higher prices. It also could study consumers who tend to overuse or misuse credit cards, to understand further why they act as they do. This study focused on people who mostly paid on time and used credit cards appropriately. Understanding brain patterns for other types of consumers could help lead to solutions that attempt to pre-empt harmful spending behaviour, Dr. Banker says.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 1, 2021

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Cryptos Are A Threat To Central Banks

Most of us go to the Bahamas for the sun and surf. Central bankers may be visiting for another reason: to check out the country’s new digital currency, the Sand Dollar. The Bahamas is one of three countries to launch a digital currency, along with China and Cambodia. Sand Dollars are now loaded in mobile wallets on smartphones; to buy a beer, simply scan a QR code—more convenient than swiping a credit card or using a grubby dollar bill.

Digital currencies aren’t yet widespread, but a race is on to get them into circulation as battle lines harden between cryptocurrencies and standbys like the dollar.

More than 85% of central banks are now investigating digital versions of their currencies, conducting experiments, or moving to pilot programs, according to PwC. China is leading the charge among major economies, pumping more than $300 million worth of a digital renminbi into its economy so far, ahead of a broader rollout expected next year. The European Central Bank, Bank of Japan, and Federal Reserve are investigating digital currencies. A “Britcoin” may eventually be issued by the Bank of England. Sweden is lining up an e-krona and might be the first cashless nation by 2023.

Money already flows through electronic circuits around the globe, of course. But central bank digital currencies, or CBDCs, would be a new kind of instrument, similar to the digital tokens now circulating in private networks. People and businesses could transact in CBDCs through apps on a digital wallet. Deposits in CBDCs would be a liability of a central bank and may bear interest, similar to deposits held at a commercial bank. CBDCs may also live on decentralized ledgers, and could be programmed, tracked, and transferred globally more easily than in existing systems.

New cryptocurrencies and payment systems are raising pressures on central banks to develop their own digital versions. Bitcoin, while popular, isn’t the main threat. It’s highly unstable—more volatile than the Venezuelan bolivar. Many investors sock it away rather than use it, and the underlying blockchain network is relatively slow.

But the cryptocurrency market overall is gaining critical mass—worth $2.2 trillion in total now, with half of that in Bitcoin. Central bankers are particularly concerned about “stablecoins,” a kind of nongovernmental digital token pegged at a fixed exchange rate to a currency. Stablecoins are gaining traction for both domestic and cross-border transactions, particularly in developing economies. Technology and financial companies aim to integrate stablecoins into their social-media and e-commerce platforms. “Central banks are looking at stablecoins the way that taxi unions look at Uber—as an interloper and threat,” says Ronit Ghose, global head of banks research at Citigroup.

While many stablecoins are now circulating—the largest is Tether, with $51 billion in circulation, versus $2.2 trillion for the dollar—a big one may be arriving soon in Diem, a stablecoin backed by Facebook (ticker: FB). Diem may launch this year in a pilot program, reaching Facebook’s 1.8 billion daily users; it’s also backed by Uber and other companies. The potentially rapid spread of Diem is raising the ante for central bankers. “What really changed the debate is Facebook,” says Tobias Adrian, financial counsellor at the International Monetary Fund. “Diem would combine a stablecoin and payments platform into a vast user base around the world. That’s potentially very powerful.”

The broader force behind CBDCs is that money and payment systems are rapidly fracturing. In the coming years, people might hold Bitcoin as a store of value, while transacting in stablecoins pegged to euros or dollars. “The private sector is throwing down the gauntlet and challenging the central bank’s role,” says economist Ed Yardeni of Yardeni Research.

The dollar won’t disappear, of course—it’s held in vast reserves around the world and used to price everything from computers to steel. But every fiat currency now faces more competition from cryptos or stablecoins. And stablecoins in widespread use could upend the markets since they aren’t backstopped by a government’s assets; a hack or collapse of a stablecoin could send shock waves as people and businesses clamor for their money back, sparking a bank run or financial panic. And since they’re issued by banks or other private entities, they pose credit and collateral risks.

As commerce shifts to these digital coins, along with other cryptocurrencies and peer-to-peer networks, governments risk losing control of their monetary policies—tools that central banks use to keep tabs on inflation and financial stability. “Central banks need to create digital currencies to maintain monetary sovereignty,” says Princeton University economist Markus Brunnermeier. The Fed, for instance, manages the money supply by buying or selling securities that expand or contract the monetary base, but “if people aren’t using your money, you have a big problem,” says Rutgers University economist Michael Bordo.

It isn’t all about playing defense, though. Proponents of CBDCs say there are economic and social benefits, such as lower transaction fees for consumers and businesses, more-effective monetary policies, and the potential to reach people who are now “unbanked.” CBDCs could also help reduce money laundering and other illegal activities now financed with cash or cryptos. And since central banks can’t stop the rise of privately issued digital money, CBDCs could at least level the playing field.

While CBDCs have bounced around academia for years, China’s pilot project, launched last year, was a wake-up call. Analysts say China aims to get its digital renminbi into circulation for cross-border transactions and international commerce; the standard renminbi now accounts for 2.5% of global payments, well below China’s 13% share of global exports, according to Morgan Stanley.

In China, transactions on apps like Alipay and WeChat now exceed the total world volume on Visa (V) and Mastercard (MA) combined. The Chinese apps have also become platforms for savings, loans, and investment products. CBDCs could help regulators keep tabs on money flowing through the apps, and help prevent stablecoins from usurping the government’s currency. “That’s why the People’s Bank of China had to claim its property back—for sovereignty over its monetary system,” says Morgan Stanley chief economist Chetan Ahya.

Momentum for digital currencies is also building for “financial inclusion”—reaching people who lack a bank account or pay hefty fees for basic services like check cashing. About seven million U.S. households, or 5% of the total, are unbanked, according to the Federal Deposit Insurance Corp. Democrats in Congress recently proposed legislation for a digital-dollar wallet called a FedAccount, partly to reach the financially disadvantaged.

Governments could also target economic policies more efficiently. Stimulus checks could be deposited into e-wallets with digital dollars. That could bypass checking accounts or apps that charge fees. It could be a way to get money into people’s hands faster and see how it’s spent in real time. Digital currencies are also programmable. Stimulus checks in CBDC could vanish from a digital wallet in three months, incentivizing people to spend the money, giving the economy a lift.

Researchers at the Bank of England estimate that if a digital dollar went into widespread circulation, it could permanently lift U.S. output by 3% a year. That may be a stretch, but central banks, including the Fed, are now building systems for banks to settle retail transactions almost instantly, 24/7, at negligible cost. CBDCs could slide into that infrastructure, cutting transaction fees and speeding up commerce. That could reduce economic friction and lead to productivity gains for the economy.

Some economists view CBDCs as a monetary-policy conduit, as well. Deposits of $1 million or more in CBDCs, for instance, might incur a 0.25% fee to a central bank, disincentivizing people and institutions from hoarding savings in a protracted slowdown. “It’s costly for the economy if wealthy people shift money into cash or equivalent securities,” says Dartmouth College economist Andrew Levin. “This would disincentivize that from happening.”

Digital currencies aren’t without controversy, though, and would need to overcome a host of technological issues, privacy concerns, and other hurdles. For one, they could make it easier for governments to spy on private-party transactions. Anonymity would need strong safeguards for a CBDC to reach critical mass in North America or Europe. Chinese officials have said their CBDC will preserve privacy rights, but critics say otherwise. The country’s new CBDC could “strengthen its digital authoritarianism,” according to the Center for a New American Security, a think tank in Washington, D.C.

There are challenges for commercial banks, too. Central banks could compete with commercial banks for deposits, which would erode banks’ interest income on assets and raise their funding costs. Various proposals address those concerns, including compensating banks for services in CBDCs. Deposit rates would have to be competitive so that central banks don’t siphon deposits. But even in a two-tier financial model, commercial banks could lose deposits, pushing them into less stable and higher-cost sources of funding in debt or equity markets.

More disconcerting for banks: They could be cut out of data streams and client relationships. Those loops are critical to selling financial services that can generate more revenue than lending. “CBDCs will pose more competition to the banking sector,” says Ahya. “It’s about the loss of data and fee income from financial services.”

Banks in the U.S., Europe, and Japan don’t face imminent threats, since regulators are going slow. As incumbents in the system, banks still have vast advantages and could use CBDCs as a means of cross-selling other services. Most of the advanced CBDC projects are for wholesale banking, like clearing and settlement, rather than consumer banking. The ECB, for instance, has said it may limit consumer holdings to 3,000 euros, or about $3,600, in a rollout that may not kick off until 2025.

A timeline for a digital dollar hasn’t been revealed by the Fed and may take congressional action. More insights into the Fed’s thinking should be coming this summer: The Boston Fed is expected to release its findings on a prototype system. One compromise, rather than direct issuance, is “synthetic” CBDC—dollar-based stablecoins that are issued by banks or other companies, heavily regulated, and backed by reserves at a central bank.

Whatever they develop, central banks can’t afford to be sidelined as digital tokens blend into social-media, gaming, and e-commerce platforms—competing for a share of our wallets and minds. Imagine a future where we live in augmented reality, shopping, playing videogames, and meeting digital avatars of friends. Will we even think in terms of dollars in these walled gardens? That future isn’t far off, says the economist Brunnermeier. “Once we have these augmented realities, competition among currencies will be more pronounced,” he says. “Central banks have to be part of this game.”

Reprinted by permission of Barron’s. Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 2, 2021.

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When To Give Inheritance Money To Your Kids

When to give Inheritance

Should an inheritance be strictly an inheritance, to be left to children when their parents die? Or should parents use at least some of that money while they’re still alive to help out their adult children financially? And if parents give while they’re alive, how much should they give and when?

Of course, every family is different—both in terms of what they can afford and what brings them joy. But there are some things every family should consider when deciding how to pass wealth from one generation to the next. The Wall Street Journal invited three financial advisers to discuss those issues: Michael Garry, founder of Yardley Wealth Management in Yardley, Pa.; Jacqueline B. Roessler, certified divorce financial analyst at the Center for Financial Planning in Southfield, Mich.; and Tony Walker, a retirement-planning specialist in Louisville, Ky.

Here are edited excerpts of the discussion.

WSJ: How do you advise clients on the topic of the timing of inheritance?

MR. GARRY: I believe strongly that parents should dole out money while they are alive and not stockpile it any more than they need to for their own financial security. The people who make gifts during their lifetimes are able to help their children, and maybe grandchildren, at the exact time they likely most need the money, and not based on the random date of their death. They also get to see the benefit of the gift to their children and grandchildren. The extent of the gifts depends on how much the parents can afford.

MS. ROESSLER: It depends on their personal goals, tax situation and current financial needs, as well as the financial needs and tax situation of their heirs. First, they need to make sure they have enough resources to cover their own financial needs, including any potential long-term-care expense. Once that’s established, they should discuss gifting strategies with their adviser, keeping in mind the parents’ ultimate goals, such as minimising income taxes and capital-gains taxes during their lifetime, spending down their assets to later qualify for Medicaid, or providing for their children’s specific financial needs.

MR. WALKER: I’m a firm believer that too many people save every penny until the day they die, instead of spending their money now. With so many savers maxing out contributions to their 401(k) plans, my concern is that most of them have no plan for using and enjoying their savings before it’s too late. There’s a struggle going on with my clients when I broach this subject of saving too much for the future. They wonder: Will their children be responsible with the money? There’s only one way to find out, and that’s throw them a bone now to see how they handle it.

WSJ: With the pandemic wreaking havoc on many families’ finances, have you seen families change the way they are thinking about inheritance?

MR. GARRY: Most of my clients are in much better shape than they were a year ago. Unfortunately, a lot of their children and grandchildren are not. We’ve seen a real uptick in people expressing gratitude in being so fortunate with their health and finances and not wanting to wait to help both their offspring and their favourite charities.

We’ve had people who have kicked the idea around for years but never did it who are actually taking steps now and making gifts. They seem to realize more than ever that they don’t know how much time they have, and some of their kids have been unemployed for much of the last year. I don’t think many of them ever expected to see their children hurting so much, and it has moved them.

MS. ROESSLER: I haven’t seen families make dramatic changes to their legacy planning, at least not yet. However, as government aid ends, many millennials will be left without jobs and with increased expenses. In conversations with older clients, they are prepared to begin making adjustments in their gifting strategy to accommodate changing needs.

WSJ: Should there be strings attracted to parental giving?

MR. WALKER: This is a gift and shouldn’t come with any strings attached. Still, how your kids and grandkids react might certainly sway future considerations as to whether you wish to continue the gift-giving trend.

MS. ROESSLER: I think it depends on the family circumstances. Some parents may feel their children need guidance on how to wisely spend gifted dollars; others aren’t comfortable attaching any strings to gifts. One family I’ve worked with requires their adult children to donate a portion of their annual gift to a worthy charity. Another family specified that the gift must be used toward college costs for their children or major expenses such as a car or down payment on a home.

WSJ: How can parents who want to help their children while they are alive prevent themselves from becoming their children’s bank?

MR. WALKER: Before starting the gift-giving trend, it is important for parents to speak about their finances frankly with their children. While you don’t have to take all of your financial clothes off, you need to be frank with them as to how you’re doing financially. As well, blend into the mix that you are very grateful for the way you have been blessed and your desire to share some of your good fortune with them now—at a time in life when they can use it—versus waiting until after you die. Also, never tell them that there’s more where that came from, as you might regret setting up such an expectation.

MR. GARRY: It makes it much easier to avoid being the bank if the child knows that the gift is for a specific purpose, like to pay their health insurance, or go toward their student loans, or make their IRA contribution or for a deposit on a property. I’ve also told my clients they can feel free to tell their children their financial adviser has said they can’t afford to make that gift or even make any more gifts, depending on the circumstances.

WSJ: What are some common mistakes you see parents making in deciding how to transfer wealth to their children?

MR. WALKER: Not understanding that the value of their 401(k) actually will go down over time. That is because between future taxes and inflation, the money they are stockpiling will be worth less then than it is now. Think about it: What if, instead of socking it all in a 401(k), you could give some money away to your kids now with no tax to them? Wouldn’t that make more sense?

MS. ROESSLER: Some parents give more than they can afford and wind up with an unintentional reduced standard of living. This can lead to marital tension when both spouses aren’t on the same page. There is also a substantial tax advantage to transferring stocks and mutual funds after death versus during your lifetime, though this could change under President Biden.

MR. GARRY: The biggest downsides come when gifts are given with no discussions around expectations. We had a client who, before coming to us, went through a bit of a rough patch with his son and daughter-in-law. He had made gifts for a few years to them around Christmas and he didn’t say anything about it other than “Merry Christmas!” Well, after three or four years of those gifts, the son and daughter-in-law expected them to continue. Without saying anything, he just stopped because he wasn’t in the financial position to continue. But they didn’t understand that and there was tension until they finally talked about why he had discontinued giving and they were able to heal the rift.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: April 30, 2021.

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Auction Markets Still Hot Despite Flood Of Listings

This past Saturday, May 1, saw the home auction markets resume at full pace with a total of 2287 auctions reported in the nation’s auction capitals, an increase of 33.9% over the previous weekend and the highest offering since the Super Saturday of March 27.

Despite the surge in auctions, the average clearance rate held firm at 83.3%, just below the 83.4 of the previous weekend.

The Sydney auction market continues what is the strongest start to the year for the local housing market since 1989.

Reporting a clearance rate of 84.6%, Sydney fell just shy of the 85.1% recorded the previous weekend, and well above the COVID-impacted 52.4% recorded this time last year.

While Sydney’s Saturday result was the second consecutive weekend of marginally lower clearance rates, it was achieved despite a 39% increase in the number of homes offered for sale.

A total of 934 auctions were reported on Saturday, compared to the previous weekends 672, while the median price of $ 1,590,500 for houses sold at auction at the weekend was 9.7% higher than the $1,449,900 reported over the previous Saturday.

Melbourne fared similarly with the auction market recording its highest clearance rate in a month – a figure of 80.1% – up on last week’s 79.0% and well ahead of the COVID-impacted 34.7% of the same weekend last year.

The strong result comes as 1084 homes were listed for auction on Saturday, well above the 835 of the previous weekend and the 157 auctioned over the same weekend last year.

Melbourne recorded a median price of $1,001,000 for houses sold at auction on the weekend which was 2.6% higher than the $975,000 recorded over the previous weekend.

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Prestige Property: 92 Victoria Road, Bellevue Hill, NSW

A true entertainer’s dream, this newly complete home is a masterful study in modern luxury.

Here, in the sought-after address of Victoria Road, Bellevue Hill arrives a capacious, four-level, residence offering approximately 1000sqm of internal living space across 8-bedrooms, 9-bathrooms and a 6-car garage – with parking for a further three additional vehicles available on site.

Boasting flexible living and an elevated, contemporary palette driven by charcoal, chrome and white tones the Simon Hanson of Bureau SRH designed home offers elevated modern family living.

What is quickly decipherable is that no detail has been spared in the construction of the home, with a combination of Japanese tiling and European oak chevron parquetry underfoot, coupled with a professional gallery lighting system.

The ground floor sees the dining and living, which flows via floor-to-ceiling glass doors out to the landscaped gardens.

It’s here, a state of the art kitchen boasts integrated SubZero fridges, a Zip tap, Miele, Wolf and Ilve appliances arrives alongside a kitchenette.  

Throughout the home there is eight bedrooms, all complete with ensuites that see Kohler branded fixtures, book-matched marble and bespoke joinery.

The master bedroom is found on the first floor with an expensive dressing room and opulently decorated ensuite. Also on this floor is an exceptionally large home office.

The top floor sees a parents’ retreat, as well as a large rumpus area for relaxing. The basement is complete with an expansive entertaining room, complete with wine cellar and billiards table, alongside a bathroom. Here, floor-to-ceiling glass doors open the space out into the garage complete with automated turntable. The basement to the first floor is serviced by private lift.

Built to entertain, the home offers plenty to be enjoyed, with the outdoor area replete with an outdoor kitchen, mini putting green, basketball court, gym, sauna, outdoor shower and magnificent swimming pool.  

Further, the home is secured by CCTV, video intercom and code entry.

The residence is conveniently only moments Sydney’s most exclusive private schools, Bellevue Hill village, waterfront parks and Bondi Junction shopping and transport.

The listing is with D’Leanne Lewis (+61 419 676 667) of Laing+Simmons, Double Bay, EOI; lsdb.com.au

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Beijing’s Squeeze On Fragile Real-Estate Developers

“Housing is for living, not for speculation,” has been a Chinese government mantra for almost half a decade. This year, it appears that slogan finally has teeth. But new restrictions on bank lending leave developers tapping a unique source of funding, which could have damaging consequences of its own.

Late last year, Chinese regulators announced that property lending should make up no more than 40% of banks’ total lending, effectively putting an end to years of steadily increasing exposure to real estate.

Looking across major Chinese banks’ results for 2020, they are very much at that limit in aggregate. At the big four—Bank of China, China Construction Bank, Agricultural Bank of China and Industrial and Commercial Bank of China—real-estate lending ran to between 37.5% and 42.2% of total loans, according to Capital IQ.

That adds to the squeeze on bond issuance from Beijing’s “three red lines” policy, which restricts further borrowing if developers don’t satisfy three leverage benchmarks. Most don’t, and issuance has eased to the smallest amount in three years in early 2021—down by a third relative to the same period in 2019—according to S&P Global Ratings.

That means a further shift to the last meaningful source of funding left, deposits direct from home buyers, is inevitable.

Deposits often constitute a large proportion of the property’s value and are now largely paid upfront, long before a property is actually built. Without a national escrow system in place, this allows developers to use today’s deposits to fund yesterday’s commitments.

China Vanke, one of China’s largest developers, reported 53.52 million square meters (about 576 million square feet) of projects it has sold but which remain unfinished. That is equivalent to more than 18 months of completions at last year’s building rate. Vanke’s unearned revenue figure—payments accepted for work not finished—sits at $104.15 billion, more than three times its level at the end of 2015, and jumped by around $7.8 billion in the first three months of 2021 alone.

That accelerated shift is also clear from official industrywide data. Deposits are now the largest single source of real-estate developer funding, and in the 12 months to March, deposits and advance payments rose 23.9%, far outstripping the 14.1% growth in other funding sources.

That makes domestic news reports about a growing number of frustrated buyers worried about repeated delays to construction, like one carried by Xinhua News Agency earlier this month, particularly interesting and concerning.

Chinese home buyers aren’t sophisticated creditors like bondholders or banks, but they carry unparalleled political weight. Leaving them to foot the bill for the excesses of fragile real-estate developers is a risky decision.

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: April 29, 2021.

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YouTubers Are Lifting The Veil on America’s Most Expensive Homes

Enes Yilmazer has toured some of the most expensive homes in the world. He’s explored penthouses on New York’s Billionaires’ Row, palatial beach houses in Malibu, Calif., and waterfront mansions on Lake Tahoe. He has oohed and aahed over Central Park views, marble floors, infinity pools, retractable roofs and candy walls and had a front row seat to an explosion of eight- and nine-figure real-estate listings across the country.

Mr. Yilmazer, 31, isn’t a wealthy buyer, nor is he currently a real-estate agent. Rather, he is one of a handful of real-estate YouTubers, amateur video hosts and producers, who are bringing regular people, via their laptops or cell phones, inside the mansions of the megarich. With more than 820,000 subscribers on his YouTube channel, Mr. Yilmazer’s videos rack up millions of views and inspire tens of thousands of comments.

“Imagine forgetting something on your way out and having to go back and walk 5-6 business days to get it,” wrote one incredulous commenter on Mr. Yilmazer’s recent video about a sprawling $38 million estate in the pricey Calabasas area of Los Angeles. “How many people would it take to clean this place!!” said another about a $50 million Bel Air chateau.

In some ways, real-estate YouTubers like Mr. Yilmazer are providing today’s answer to the MTV Cribs phenomenon of the early 2000s, offering the masses a rare glimpse at how the 0.1% really live. But rather than getting a peak through the eyes of a movie star or a suave celebrity real-estate agent, like on shows such as Bravo’s “Million Dollar Listing,” they’re seeing these houses through the eyes of a regular guy just like them.

Two years ago, Mr. Yilmazer and his longtime friend Michael Ayers started the channel with just a handheld camera, filming any house a high-end real-estate agent would let them into, he said.

Now, as they grow more sophisticated with their production, YouTubers like Mr. Yilmazer are shaking up how high-end real estate is sold in cities like Los Angeles, New York and Miami. They are making YouTube, the Google-owned video website, an increasingly important marketing channel for even the most privacy-obsessed homesellers and their real-estate agents. That’s been particularly evident over the past year as the Covid pandemic reduced the number of buyers willing to tour homes in person.

“Since Covid, people aren’t out and about the same way,” said Samantha Sax, chief marketing officer of Pontiac Land US, one of the developers of 53 West 53, a luxury skyscraper on New York’s Billionaires’ Row that Mr. Yilmazer recently featured on his channel. “They want to see things from their phone and computer more than they ever have before.”

The success of these real-estate channels has led to a rush of new copycat channels, some of which merge real-estate content with videos about designer cars, watches and get-rich schemes. It’s also spurred a boom in the number of agents trying to create their own video content, which can be hit or miss.

While some agents, like Ryan Serhant of “Million Dollar Listing New York,” have quickly become YouTube stars thanks in part to their television fame and big personalities, not all big-ticket agents were created with a lights-camera-action personality. Many come off as stiff and overly salesy to a YouTube audience, Mr. Yilmazer said. His own style is laid back and informational as he methodically walks viewers through all the features of each house.

Mr. Serhant said he tries to help members of his own team at his firm Serhant to be more natural on screen, with improv classes and on-camera training.

“There’s no specific personality that works well in front of the camera but you have to have one,” he said.

As the real-estate YouTube space becomes increasingly popular, these YouTubers are lining their pockets.

Mr. Yilmazer said he is bringing in between $50,000 and $100,000 a month in revenue from his YouTube channel in ad revenue alone, putting him on track to bring in more than $1 million this year if the growth of his channel continues at its current pace. Those are just the revenues provided by YouTube for allowing their automated ads to stream on the channel without any effort from Mr. Yilmazer’s own small team. On top of that, he and his team can make money from dedicated sponsorships—Mr. Yilmazer will personally feature a particular company’s brand in his videos for a fee that runs in the tens of thousands of dollars— and the money real-estate agents offer him to feature their listings on his channel. He said he often won’t charge if a property is particularly spectacular and will drive viewership to his channel. If a property is less impressive, he charges a fee, which typically runs into the five figures.

Mr. Yilmazer said he pays three videographers to shoot with him and production can run him between $5,000 and $15,000 per video. There are other expenses, too. He has invested around $25,000 in a drone set up, for instance.

Erik Conover, 31, a competing real-estate YouTuber with nearly 1.6 million subscribers on his channel, said he typically charges a rate in the tens of thousands of dollars to feature a company’s brand in his videos in what he calls a “45- to 50-second integration.” When he chooses to charge an agent to feature their property, it can cost them in the low five figures. He said he typically brings in between $10,000 and $30,000 a month in revenue from ads provided by YouTube.

He said that his audience, 25- to 35-years-olds in big cities around the world, is desirable to advertisers, but he believes his videos also drum up potential buyers for the luxurious homes he has featured on the channel. Sometimes, they refer videos to their wealthy parents, he said.

Still, not everyone is sold on letting YouTubers have free rein in their properties, since some agents believe that prospective buyers would prefer that their future homes not be splashed all over the internet.

“A lot of sellers at a very high level want to maintain some semblance of privacy,” said Alexander Ali, founder of the Society Group, a real-estate public relations firm that advises agents across the country. “Our buyers would not necessarily want everyone seeing their bedrooms and the overall layout of the home from a security perspective. You have to hold stuff back.”

Sometimes sellers don’t appreciate their homes being used as bait for advertisers, especially when those advertisers don’t reflect the kind of high-culture vibes they’re trying to give off. One marketing professional said he had an agent complain about allowing a YouTuber film in his trophy New York apartment, only to see images of the opulent apartment juxtaposed against crude advertisements for a company specializing in “manscaping” in the resulting video.

Skeptics also question whether YouTube videos actually sell these homes, since most of the viewers are watching voyeuristically and can’t personally afford the properties. Mr. Covonver and Mr. Yilmazer admit it’s likely that only a very small percentage of their viewership has the necessary net worth to purchase. But Mr. Conover said those viewers do exist, citing first-hand experience. Once, while running on a treadmill at his local Equinox gym, he had a stranger approach him about a video he had filmed in a penthouse at Walker Tower, an Art Deco building in New York’s Chelsea neighbourhood.

“He said, ‘You know I purchased an apartment in that building based on your tour,’ ” Mr. Conover recalled, noting that the apartment the man bought was priced around $25 million. “That was the moment where I was like, ‘Okay, this is very real.’ ”

Both Mr. Yilmazer and Mr. Conover are entirely self taught in videography, editing and filmmaking and their videos started out rocky.

Mr. Yilmazer, who is originally from Turkey, was a professional windsurfer with a scholarship at Texas A&M University–Corpus Christi before investing in house flipping with the proceeds of his surfing sponsorships. When he moved to Los Angeles in 2018, spurred by a dream, fueled by reality shows on Bravo, of “palm trees, nice cars and beautiful hillside homes,” he got his real-estate license. His career as a broker never really took off. Instead, as he was touring other agents’ trophy listings at open houses, he thought about how much others would love to see inside these extravagant properties. The idea for a YouTube channel was born.

“I was going to brokers’ open houses and seeing all these incredible homes,” he said. “I’m like, ‘This is crazy. I’m in a city where literally the rest of the world aspires to come to and I’m touring $200 million worth of real estate on a regular Tuesday. There’s something here. Why is no one is making any kind of a YouTube channel out of this?’ ”

He quickly called his friend Mr. Ayers and asked him to move to L.A., where the two of them began attending the open houses together, with a GoPro in hand, and asking agents to let them film. Initially, Mr. Yilmazer thought the channel might drive would-be buyers to use his services as an agent.

It took months for the channel to build momentum and generate revenue, but soon it grabbed his focus from actually selling real estate, he said. Mr. Ayers slept on his couch during the early days of the project. Over time, the videos evolved to be more professional. Mr. Yilmazer got more informed about each house and dedicated whole videos to just one property rather than showcasing a hodgepodge of houses around town in each episode. He also made videos longer form, since he said the YouTube algorithm favors longer-form content and increases his chances of being featured on viewers’ home screens.

Mr. Conover, who still edits all his videos, said he remains wowed by most of the houses he sees. A graduate of Northeastern University in Boston, he discovered YouTube after doing a bunch of odd jobs in New York, such as manager at Abercrombie & Fitch, fitness instructor, and lifeguard at the Gansevoort Hotel pool.

“I don’t come from wealth. I grew up in a 900-square-foot two-bedroom house in a town called Absecon, N.J., so for me every time I step into a property like that, it’s surreal,” he said. “I was essentially broke when I started my YouTube channel and I was filming it on an iPhone editing with iMovie.”

His situation has changed dramatically. He recently allowed his viewers in on his personal search for a home, scoping out apartments in Soho and Tribeca priced at as much as $10,000 a month.

Mr. Conover said he doesn’t think it would be possible for newcomers to replicate his success now that the business has matured, unless they had a unique idea. “You need high-quality cameras and proper editing,” he said.

YouTubers also have to tread carefully when it comes to biting the hand that feeds them luxury homes to film. Mr. Conover was having so much success with his channel over the past year that he was approached by a New York real-estate firm Nest Seekers International, which wanted him to get his real-estate license and become an agent. At the time, Mr. Serhant, the “Million Dollar Listing New York” star, had moved on from Nest Seekers to start his own company and the brokerage sought an agent who could replicate his YouTube following.

“We wanted to remain active in that space,” said Eddie Shapiro, the chief executive of Nest Seekers, who said he wants his firm to be on top of the online trends. “It’s all about being progressive. It’s like, are people buying $100 million homes on TikTok? I don’t know that yet but I don’t want to miss that boat if it comes.”

Now that he is an agent on the side, Mr. Conover said a small number of New York agents don’t want him to film their listings—they view him as competition. He said he doesn’t mind so much since he thinks there are plenty of exciting properties for him to feature elsewhere. For those agents he is working with in New York, he assures them that he’s a YouTuber first and an agent second.

Mr. Yilmazer recently gave up his license because he felt it was limiting the access he could get to the biggest listings. He said he believes the ceiling on his YouTube career is higher. “If you have a listing on the best sites like Redfin, Zillow at best maybe you get 30,000 or 40,000 clicks,” he said. “We’re getting two to three million people to click on our videos and I believe we can scale that to 10 times bigger than what it is right now. That is, to me, that’s incredible.”

Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: April 29, 2021