SSS – January 2015

RBA Cash Rate – The Board doesn’t meet in January so remains on hold at 2.5%. When they meet again in February I expect it to remain unchanged with the prospect of another rate cut by the middle of the year. This is due to low inflation and therefore low interest rates in the US, Europe and Japan.

Remember, the banks borrow money from the Reserve Bank at the base rate, and then lend it to you and others at a slightly higher rate. The difference between the two rates is how they make their money.

Vacancies – Just a reminder that when it comes time to rent your new investment property, the months of Dec-Feb tend to be the ‘turmoil’ months as this is when the majority of people move house and leases terminate.

Depending on location and rental market conditions it is not uncommon for a property to remain vacant for around 4 weeks as people slowly settle and leases are taken up. Provided you’ve got a good property in a good area and at a reasonable rental price – it will be leased.

The financial buffers we advocate are there to protect you in these very circumstances as they buy you time during the search for a tenant.

Foreign Investor Demand – Hearing again more cries lately about foreign buyers (Chinese especially) driving up property prices. The majority of these foreign purchases are in CBD high-rise apartments. We don’t generally invest in such apartments due to minimal land content and high strata fees therefore it doesn’t affect our investment strategy or outcome. This old guy knows exactly what’s going on! You can watch his short interview here.

Economic Rent – A 25min video from the BBC on property prices in Gaza City. It goes to show that it doesn’t matter where in the world you are, wherever there is people, commerce and an economy – all of those gains (economic rent) will be captured by the land price and reflected in its rent. You can view it here:

QuoteAn investment in knowledge pays the best interest – Benjamin Franklin

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