Archive for November, 2009
Thinking of buying property? WHY? No really, give it some thought. I mean deep independent thought.
Are you keeping up with the Joneses, or do you fear you may never be able to get into the market again?
Many people are buying property because someone else told them to do so, or they believed the latest story in the paper. They are not necessarily thinking for themselves, instead they are just following the crowd and receiving results that don’t match their desires.
Don’t be influenced by the media or the short term market movements in prices. The most important thing is to use your brain and think about your own situation, what you want to achieve, and talk to professionals who live property and listen carefully to what you really want.
To understand the power of independent thinking, here is some wisdom about Warren Buffet, a real thinker:
- He bought his first share of stock at age 11 and he now regrets that he started too late!
- He bought a small farm at age 14 with savings from delivering newspapers.
- He drives his own car everywhere and does not have a driver or security people around him.
- He still lives in the same, small 3-bedroom house in midtown Omaha that he bought after he got married 50 years ago. He says that he has everything he needs in that house.
- Warren Buffet does not carry a cell phone, nor has a computer on his desk.
- His advice to young people: ” Stay away from credit cards and invest in yourself and remember:
A. Money doesn’t create man, but it is the man who created money.
B. Live your life as simple as you are.
C. Don’t do what others say. Just listen to them, but do what makes you feel good.
D. Don’t go on brand name. Wear those things in which you feel comfortable.
E. Don’t waste your money on unnecessary things. Spend on those who really are in need.
F. After all, it’s your life. Why give others the chance to rule your life?”
Need food for thought? Call our Acquisition Team on 02 9449 2333 for assistance with research, strategies and options available to you and how property can match your life plans.
Last weeks decision by the Reserve Bank to raise interest rates by a further 25 basis points has been met with mixed reaction. First Home buyers and low income households will feel the pinch the most while other parts of the market aren’t as likely to be affected – those who have budgeted prudently (or at least those who have taken our advice) will have built a more normal rate of mortgage payments into their financial plans and investors are probably thankful for the rate rise as it means less competition in the market place for relatively scarce real estate stock.
If the financial markets are anything to go by, the tightening cycle of interest rate rises has some way to go. As can be deduced from our interest rate chart by February next year financial markets are suggesting the cash rate will be at 4.0% and by June about 4.75%. If banks move in line with the cash rate, this means the average standard variable rate will be about 6.8% in February and 7.55% in June. A long way from where we were a couple of months ago.
However, in the interests of relativity as the graph below from RP Data shows the average mortgage rate over the last 10 years has been 7.25% which highlights the fact that mortgage rates are still well below average and are likely to remain so well into 2010.
The Federal Government announced this month that each state government could cap the first home buyer grant – set to fall to $7000 from January 1.
In NSW, that upper limit will be $750,000, while halving of stamp duty on any property up to $600,000 will also be wound back at the end of the year.
This could affect first home buyers looking to purchase close to the city, as prices in this zone are often above the new upper threshold of $750,000.
However, first home buyers should not discount middle circle suburbs where it is still possible to purchase under $600,000.
Some recent capital gains in these suburbs have also outperformed inner suburbs (particularly those in the Northwest and West).
Remember, always consult a trusted property professional before investing.
On the day where we all get together and pin our spare change on a horse, the RBA pulls the reins and increases the official cash rate by 0.25%.
The RBA argues that increases are needed to cool the pace of the economy and let some steam out of the housing market, so that inflation stays on course for its target in the years ahead. So who wins when rates go up?
The Winners: Cash holders earning more interest.
The Losers: The Mortgage Belt. It’s another $15 a week on a $300,000 home mortgage.
Ok, I hear you….its not as simple as that. What about the effect this will have on home buyers in the market, what about house prices, the Aussie dollar, exchange rates, inflation, unemployment? How do you really know if you win or lose?
Well, it’s a bit like explaining how $15 a week less in your pocket means you don’t buy your wife a bunch of flowers this week, and whether or not she still makes you breakfast in the morning and how that impacts you getting to work on time, and how your boss frowns when you arrive late, and then he doesn’t give you a pay rise next month, and then you don’t buy your wife flowers again.
In an interconnected economy, it all goes around in circles…just like the runners in the Melbourne Cup.
So put your money in wise investments and make sure you have enough savings to run the RBA interest rate race in the coming year, with more rate rises expected.
P.S. Don’t forget the flowers.
With low vacancy rates across major metropolitan areas, a lot of investors are asking what is best, a short term lease or long term lease?
Here are a few things to think about when considering what to do…
• Rental Demand for your Area: In general, if demand is high for rental property in your area, you should consider shorter term leases. If considering a long term lease such as 3 to 5 years, build in rental increases.
• Planning on selling soon? If you are selling soon, a tenant may make it harder to sell. Most of the time, having a tenant can cause access issues, as well as negatively affect the presentation of the property. Also, buyers wanting to move in straight away can be turned off. If you are planning to sell your property, consider a shorter term lease.
• Changeover costs: Short term leases can have higher changeover costs. They include re-letting fees, cutting keys, changing locks, lease preparation, lodging a bond, condition reports, advertising costs. Also, a lot of wear and tear occurs during tenants moving in and out, and we usually experience new tenants requesting more maintenance than existing tenants, so a longer lease becomes more favourable over time.
So it all depends on your circumstances and your investment strategy. Keep in mind that during this tight rental market, tenants prefer longer leases to provide them with certainty and security.
Want to talk strategy? Call Plan Assist on 02 9449 2333. We have a team of property professionals ready to help you with your investment decisions.