SSS – July 2015

RBA Cash rate

As expected the official cash rate was left at 2% for July. I still expect there to be no change until around October/November where there may potentially be another cut. Of note the Canadian central bank have just cut their official rate to 0.5% this month remembering their economy is very similar to Australia’s.

The RBA are making noise again about needing to review (read abolish) negative gearing on property. It’s only speculation but we think they’re raising the issue again in an attempt to ‘scare’ investors away from property as they don’t want a potential bubble to form when they eventually do cut rates again.

Why might they cut? – Unemployment in SA is now 7.6% (6.1% nationally) and national inflation and consumer confidence in general are still tracking on the low side. Australian Government debt is now also $373.1 billion up from $356 billion in February. The Aussie dollar has dropped to around $0.74US which is a good thing.

It’s important to note that inflation will eventually tick up bringing higher interest rates and increased land values with it. They who hold the most property during this inflationary period will benefit the most.

Regarding the Greece crisis – I wouldn’t worry about it too much. What’s interesting though is the agreed solution to their debt problem is to actually grant them more debt by way of bailout loans. This is because our entire financial and monetary system is based on credit and lending. A mentor of mine put me onto the following ‘crises’ we’ve seen over the last few years post GFC:

  • Australian housing collapse
  • China’s housing boom and collapse
  • US debt ceiling
  • US money printing
  • European money printing
  • Italian interest rates
  • Spanish interest rates
  • Portuguese interest rates
  • Greek debt default
  • Dubai
  • Cyprus banking bailout
  • Europe’s alphabet soup of bailout plans
  • Japan’s money printing
  • Japan’s interest rates
  • China’s interest rates (Shibor — a term few used before or have used since the apparent ‘Shibor crisis’)
  • Syria, Libya, and Egypt
  • Emerging markets
  • Argentina’s debt problem
  • Russia and Ukraine
  • China (again)
  • Turkey

This list will keep growing and risk is always ever present. You will do well though if you can see through the noise and appreciate the 18.6 year real-estate cycle that I keep banging on about. This is because all the credit created by banks will eventually find its way into a land price somewhere.

Market Update

Congrats to our members who are now in the process of securing their second investment properties through our team! Following the infrastructure trail is proving to be a crucial part of asset selection and getting to a $2 million asset base.

http://www.propertyobserver.com.au/terry-ryder

We’re still focused on south-east Queensland, Cairns and Melbourne’s northern growth corridor. I feel Darwin and Perth will present some good buying opportunities in about 12 months time.

Quote

It’s easier to stand on the sidelines, criticise, and say why you shouldn’t do something. The sidelines are crowded. Get in the game. – Robert Kiyosaki

We love your referrals! Please keep them coming. Remember the team can assist in all aspects of finance, tax & accounting and financial planning.

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