Key investment topics we’ve been tracking over the last couple of months are as follows:
Australian interest rates
The RBA cash rate is still on hold at 2% but we can expect another cut by year’s end. The interest rate you and I pay on our loans will either remain stagnant or slightly increase throughout the course of the year as banks continually test the waters on how to further extend profitability. At this stage I’m still keeping my loans variable as it provides more flexibility during the acquisition phase.
60 Minutes story – housing crash
An American economist by the name of Jonathan Tepper was on 60 Minutes back in February warning Australia of a pending housing crash. It turns out Tepper and his hedge fund had significant ‘short’ positions on Australian banks. The 60 Minutes approach was an apparent attempt to get the mainstream (mum & dad’s) to sell down their shares in the major banks so Tepper & Co could get out of their short positions at reduced costs.
The 60 Minutes story focussed on inner-Sydney property prices and the huge losses experienced in the QLD mining town of Moranbah. As experienced investors we would never condone buying into either of those locations simply because the market fundamentals don’t support it even at the height of the mining boom.
A lot of debate and commentary lately on the merits of getting rid of negative gearing. I wouldn’t get too hung up on it as it will almost certainly remain in place for new builds which is our primary asset class.
With national unemployment steady at 5.8%, mortgage delinquency rates below 2% and a lot of infrastructure under construction or being planned, Australia as a whole is looking pretty good. The mining economies of WA and the NT are in a downturn and should present some good buying opportunities in the next 12-15 months.
Our primary focus is still in the south-east QLD market given the strong combination of infrastructure, private industry expansion and population growth. Good opportunities are also available in the Victorian regions of Epping and Sunshine.
For our members considering tax-efficient options when receiving the retention benefit, a valid strategy is to prepay up to 12 months interest on an investment loan in the financial year it is received. When coupled with the significant depreciation ($8-$12K in the first year) on a new build, more of your income tax will be diverted to your asset base instead of Canberra. This will require personalised accounting advice for which we can provide a referral.
Many thanks for all your referrals so far as we really enjoy assisting ADF members, their friends and families build genuine wealth through residential property!
Someone is sitting in the shade today because someone planted a tree a long time ago – Warren Buffet