2012 looks to be a positive year for property, however the question is by how much?

There are a lot of different reports and articles flowing through telling us that property prices are finally on the way up, and further rate cuts are imminent. However the doom & gloom reporters are still telling us that another GFC is just around the corner. How do you know if the time is right to invest your funds, and be able to grow your money for your family and your retirement? “Investing in shares, cash and property isn’t the same as it was 5 years ago. Back then you could invest your money in any direction and [within reason] be guaranteed to have growth in your portfolio,” commented Harry Charalambous of Plan Assist.

The RP Data – Rismark Home Value Index has released that in seasonally-adjusted terms, Australia’s capital city home values rose by 0.1% in November 2011. Whist this amount may seem very small, this increase was the first since December 2010. Rismark’s director Christopher Joyce commented that they project housing activity will rebound solidly. He said the best proxy for housing demand is the number of new home loans approved for purchasing established properties, and this has risen robustly every month since March 2010.

And whilst we all like to complain about the banks extremely large profits, and their resistance to pass on rate cuts to their customers, it is undeniable that our banks have provided a safety net for the Australian economy, which is coming out of the GFC somewhat bruised but indeed intact. With banks’ profits remaining to increase year on year, this stability should hopefully prop up the economy during these unsteady times.

After 30 consecutive months without a rate cut, the Reserve Bank’s decision to recently reduce the cash rate has also boosted confidence. When the RBA meets on February 7 a further rate cut is expected in many reports seen over the last week.

All of this leads to good news for Australian property prices. However Plan Assist’s director Harry Charalambous warns you should always have a strategy in these challenging times. “I encourage my clients to make decisions using strict criteria to reduce risks that the current climate may present. During my training I urge clients to look for property that suits their needs right now, and also in the future. In my recent training to ProfitsToShare clients I taught 3 ways to profit in today’s market, which helps give diversification in their portfolio, as well as provide additional cashflow to their current income.

Once all the planning and training is complete, to have your goals to come to fruition the most crucial step is taking massive action towards these goals. I have come across a lot of people who want to get into the market place, yet they seem to take months, sometimes years in preparation, and at the end of the day the best way to get ready to enter the market is to enter the market. The feedback from some of our most successful clients, is that having someone there guiding them through the process has given them the confidence and certainty to take that first step, knowing that they had the support where required.

Harry Charalambous provides professional property training. To enquire about his services phone Plan Assist on 1300 039 801 or email info@planassist.com.au

The debt crisis in Greece, Italy, Ireland and UK could increase borrowing costs for Australia’s banks.

While the global financial crisis forced Australia’s banks to reduce their dependence on international market for financing, some 40 per cent of their funding requirements are still sourced from global markets.KPMG financial services partner Andrew Dickinson said while the banks remain fairly comfortable where they are in their funding programs, the debt exposure in countries such as Greece, Portugal and Spain means any escalation of the crisis could negatively impact Australia’s financial sector.“While Australian banks have improved their funding mix and liquidity since late 2007, they still rely on off shore wholesale funding,” Morgan Stanley analyst Richard Wiles told The Australian Financial Review.

“As such, we will still see higher funding costs as a source of downside risk.”According to Mr Wiles, of all the majors Westpac is the most vulnerable to higher borrowing costs because it has larger financing needs.There is a strong chance these extra costs will be passed on to mortgage borrowers in the short term. CBA announced that the pressure was on their interest rate margins, and “something has to give”. NAB have committed to only moving their rates in line with the RBA.

If you find yourself asking this question, it’s time to learn the answer.

The lizard brain (quick) answer is: No. Stop listening to the fear tactics of politicians, and start thinking for yourself.

The brain surgeon (long) answer is: Interest rates are set independently by the RBA Board each month in response to economic conditions such as inflation, unemployment rate, global trade, property markets, currency fluctuations, and a crystal ball.

There is a small influence from the government in the fiscal and monetary policy such as stimulus into the economy. i.e. baby bonuses, pensioner handouts, first home owner grants. Generally speaking, we are in a time of political stability and there is not much difference in policy between the two major parties in Australia, and no radical sweeping changes that will change the nation, like a GSTax or floating the dollar.

So, if you were to ask us the question: Will interest rates be higher or lower if this party wins, the simple truth is interest rates will be the same despite who wins next month’s election.

For more info, read this article 21/07/10

Having held off raising interest rates in February, the RBA has, as expected, pushed up the official cash rate by 0.25%.

So far 3 out of 4 major banks have mirrored the Reserve Bank with a 0.25% increase to their standard variable rate. CBA now has a standard variable rate of 6.86%, ANZ 6.91%, and Westpac 7.01%. NAB has yet to confirm an increase.

Try this quick exercise:

Work out your future repayments.

Enter your loan amount and an interest rate of at least 7.5%.   Go To Loan Calculator

Make the loan term equal the years remaining on your home loan (so if you have had your loan for five years, change the 30-year term to 25 years).

Is this Comfortable or Scary?

If it looks a bit scary though, it’s time to make some changes.

Know your money habits

You have to first identify your ‘bad’ money habits – the ones that can get you into trouble by overspending. Next, you have to start being strict with yourself on what you can and can’t do.Take action NOW!
Do not wait for rates to become so high you are really starting to stress out – pretend we are in the position now and make adjustments to your life. Your action now will start to safeguard you against the rate rises to come.

You need to be savvy with your money. Do you spend all of your income each month? Is it because it is just there or is it out of necessity? Most of us spend what we earn, no matter how much that is. We often see people with extremely high salaries and no savings – human nature does not seem to change much no matter your financial position. Contact us here for a link if you require one.

It might be time to for a lower interest or a better product to suit your lifestyle. Contact us here. We can help you find out if your current loan is the best for you going forward.

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.