SSS – March/April 2016

G’day  All,

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.

Negative gearing

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.

Australian market

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.

MSBS retention

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

SSS – Jan/Feb 2016

RBA Cash Rate
-Remains on hold at 2%. Inflation increased slightly over the Christmas quarter but still remains under the RBA’s preferred 2-3%. Expect official rate to remain on hold with potential for another cut.
-Interest rate increases by the banks from hereon are now purely for profit as investor lending growth is now contained below the regulator’s (APRA) annual 10% guideline. If in doubt about any loans you have then please get in touch with Simon to arrange a no-obligation review.

Global Economy
– US raised their official interest rate by 0.25% on the back of a strengthening economy and increasing real-estate values.

-The Japanese official interest rate is now negative and I promise this isn’t a joke. This only affects the Japanese banks in a bid to get them to lend more money into the economy rather than keep reserves on deposit with their central bank.

-Global oil prices have dipped below US$30 a barrel. Cheap energy is a pre-cursor to a strong economy and a strong economy is what supports rising property (land) prices.

-Whilst China is in a spot of bother economically, most of their issues will remain contained internally. Whenever you hear bad news always remember that there’s approximately 2.5 billion people in the Asia-Pacific region that are either in or moving into a recognised middle-class. These people will be demanding higher quality food, leisure, health and education and Australia is well placed to service these demands. Take baby formula for instance. The Asian Century is the main driver behind the Federal Government’s push to further develop northern Australia.

Australian Market
-No change to our focus on the south-east Queensland market. Congratulations to those that have recently secured early-stage land through Catherine in Brisbane’s south-west corridor!

-As a guide for those with a NAB DHOAS loan, you shouldn’t be paying more than a 4.75% interest rate. The bigger your loan amount then the bigger the discount. If you are paying more than 4.75% then get in touch with NAB and request a lower rate.

Overall 2016 looks set to be a solid year to get your property portfolio underway. The ideal time was 2 years ago but the next best time is now. For those in their mid-20’s that have recently joined Defencewealth and started the TWO-50-TEN™ journey – welcome! By the time you are in your mid to late 30’s you’ll be in a very healthy financial position provided you stay the course.

If you or anyone else you know are seriously considering property investing then please get in touch. As investors ourselves, our core business is to assist you with strategy, finance and asset selection with referral partners for tax, accounting and financial planning.

Here’s to a great year!

Diversification is protection against ignorance. It makes little sense if you know what you are doing – Warren Buffet

SSS – December 2015

RBA Cash Rate
The official interest rate was again kept on hold at 2% for December. The RBA will meet again next in February. National unemployment has dropped to 5.8% and the Aussie dollar still hovers at around $0.72US. This is all good news. Inflation though is still quite low so expect the RBA to remain on hold with potential for another rate cut in early 2016.

There’s been a substantial drop in investor lending nationwide over the last few months. This is great news! Owner-occupied lending has increased as banks are still making it harder to borrow for investment purposes. This is the cycle at play and we’ve been here before.

Some commentators are expecting a recession in 2016-2017. The 18-year cycle has it timed for around 2019-2020. I’m still acquiring assets leading up to 2019 but we will need to watch our debt levels going into 2019. For our older members who might remember, effects will be similar to the ‘dot-com’ crash in 2000-01. Whilst 2019 may seem like a long way off – property investment is long-term.

Congratulations to our Investors and First Home Buyers that have recently constructed or are in the process. As you’ve seen, land acquisition and subdivision is a time-consuming task with significant red-tape attached. If you are seeking the DHOAS lump sum, just make sure your subsidy certificate is valid for when hand-over occurs otherwise you will miss out.

Market News
The south-east Queensland region still remains our investment location of choice. Significant infrastructure projects that add to land values combined with population and employment growth are the primary reasons. We have now missed the boat on the Pimpama/Coomera region due to high land price although Catherine has been successful in sourcing stock in other emerging markets. For mine, key areas we’ll be focussing on include Ipswich, Ripley, Narangba, Northlakes and Cairns in Queensland and Epping, Mill Park, Doreen, Mernda and Thomastown in Victoria.

I think the key indicator for wealth is not good grades, work ethic, or IQ. I believe it’s relationships. Ask yourself two questions: How many people do I know, and how much ransom money could I get for each one? ― Jarod Kintz

Once again thanks for all your support over 2015 and please feel free to get in touch over the holiday period if you have any investment questions.

We wish you a very festive and safe Christmas and New Year and look forward to assisting you and your family in building genuine wealth throughout 2016!

SSS – November 2015

G’day All,

The RBA have kept the cash rate on hold at 2% for November. The Aussie dollar is hovering at around $0.71US which is helping to boost major exports including international tourism.

Latest inflation is tracking at 2.1% annually (the RBA target is between 2-3%) and trending down. We will probably see another cut by the RBA by March/April 2016 if not next month to help stimulate extra spending and inflation.

As you know banks have increased their mortgage interest rates across the board citing higher capital reserve requirements by APRA. The capital reserve increase has gone from 0.16% to 0.25%.

What this means is that for every $1.00 that a bank ‘lends,’ they must hold $0.0025 in cash. Or put another way, on a typical $450,000 home loan, banks only need to hold $1,125 (a quarter of 1%). This is fractional reserve banking and is the primary way that our money supply is created and added to.

All money and credit created must actually be borrowed into existence by someone, with interest rates controlling the velocity at which that money flows through the economy.

Right now the trend is to divert money creation away from property (land value) hence the increase in mortgage interest rates which are even higher for investment loans. Do not be swayed by this. We have been here before (approx. 18 years ago) and this is the cycle at play.

To questions of whether to look at fixed rates or not, my take is fairly simple. If I’m still in acquisition phase I’ll give greater consideration to remaining on variable rates to maintain full flexibility in refinancing. If I’m in consolidation phase then fixing can be considered.

You can also opt to split your loans between variable and fixed. It all boils down to your risk appetite and investment goals. Simon and his team are all over the current finance landscape and can assist with all lending requirements including that of friends and family.

Market News
Congratulations to those that have recently secured property through us in Coomera and Pimpama. The $1 billion Coomera Town Centre is now about to begin. This new infrastructure will increase adjacent land prices however our ideal purchasing window is now beginning to close as well priced land is now much harder to source.

Darwin is also set to greatly benefit in future Northern Australia investment and development in line with the Asian Century.

As always we’ll keep you posted on new property investment opportunities as they arise.

Once again thanks for all your referrals and please keep them coming!

Wealth consists not in having great possessions, but in having few wants – Epictetus

SSS – Sept/Oct 2015

RBA Cash Rate
Left on hold at 2% for both September and October. The official interest rate setting is really only a factor for owner-occupiers now and less so for investors as most lenders have increased their investor interest rates by between 0.25%-0.45%. If you’re on a fixed rate then it’s obviously not an issue at the moment.

The reason we watch what the RBA does with the official cash rate is because it’s a gauge on the broader economy. When the economy improves and inflation begins to pick up the RBA will increase the cost (interest rate) of money. At the same time the value of hard assets (land in particular) will rise to capture the increase in inflation and economic gain.

There is no doubt that right now is the time to be acquiring favourable assets in solid markets whilst rates are historically low. Also remember that residential housing is the business but the wealth is in the land.

Market News
Northern Gold Coast

  • Confidence and momentum in the Coomera and Pimpama markets are solidly increasing.
  • SQM Research have upgraded their outlook for the region. As a result we’re now seeing an increase in land prices from developers (if it’s in the news, it’s in the price);
  • Although vacancy rates are trending lower, we’re finding that it is taking some time (approx. 3-5 weeks) to initially lease some properties. This is typical though for the winter months.
  • By securing property now at today’s price points, any drops in future rental return as housing supply increases will be manageable. This is also why I think we only have an 8-12 month window to secure land in this market.

Northern Brisbane/Sunshine Coast

  • A lot of infrastructure going up or planned. The North-East Business Park in Morayfield is underway.
  • Construction of the $1.5 billion Kawana Health Precinct on the Sunshine Coast is also underway making it the largest health precinct in Australia.
  • Similar to northern Gold Coast, we are witnessing land price increases by developers as more infrastructure projects and buyer interest gets underway.


We love your referrals! Please continue to let your friends, family and colleagues know about the Defencewealth team and service.

Never invest in a business you can’t understand and beware of geeks bearing formulas. – Warren Buffet

SSS – August 2015

RBA Cash Rate
As expected the RBA held rates at 2% for August. We’re still anticipating a further cut later in the year but this most likely will not flow on to investment lending. Rather it’ll be aimed at more owner-occupied borrowing and personal consumption loans for things like cars and technology.

The above is very important to note as owner-occupiers buy based on emotion and lifestyle; investors like us buy based on economic fundamentals and numbers. Emotion and desire contribute significantly to higher property prices, although the mainstream will have you believe it’s all because of ‘greedy’ investors. The more credit that is created and lent to owner-occupiers to buy into the ‘great Australian dream,’ the higher we can expect the land price to increase.

As alluded to in a previous SSS, we’ve been here before in the mid 90’s when interest rates for property investors were higher than owner-occupiers. This is the cycle at play, trouble is most of us were either too young or just not aware of what was happening and why.

For those concerned about a property bubble, Core Logic released data showing that total value of Australia’s real-estate broke through $6 trillion in June 2015. What’s really interesting though is that the value of total debt tied against this $6 trillion is approximately $1.49 trillion. This is an LVR of only 25% meaning total values (excluding vacant land) are worth four times more than the debt held against it! This is nowhere near bubble territory so keep this in mind when you next hear a bad news story about property bubbles.

Core Logic article

Market Update
Congratulations to those who have either recently or are close to being completed on their investment properties! Infrastructure in preparation for the 2018 Commonwealth Games is well under way which will greatly improve amenity and desirability of the Pimpama/Coomera regions.

The second Toowoomba Range Crossing project is expected to pump around $500,000 per day into the local economy. We can expect land values to take up most of these gains going forward.

Whilst the South Australian economy is pretty flat at the moment for our first-home buyers, land-locked infill developments close to amenity and infrastructure will prove to be worthy investments in the long term.

Investment Strategy
For those not aware Defencewealth advocates a TWO-50-TEN™ strategy. This is based on acquiring a $2 million portfolio, consolidating down to a 50% LVR and achieving sustainment within a ten-fifteen year period. The properties acquired must be assessed against cash flow, capital growth and risk noting we target new property to better maximise the effects of depreciation and stamp-duty savings.

It can be hard to project manage all the services required to see through successful investing, that’s why Defencewealth has an established team in place to look after our ADF client-members. Teamwork, integrity and trust run through everything we do and it’s important you only work with people who are not only investors themselves but have achieved success in the field.

Global Economy
In summary:
• Greece is getting bailed out again with more loans and will remain within the Eurozone;
• The Irish, Spanish and UK economies are now significantly improving;
• The US are talking about raising interest rates by year’s end. Remember this only happens when an economy is improving;
• China not so good, may impact Australia’s economy particularly going into 2019-2020 but wait and see;
• Australia is joining the Chinese-led Asian Infrastructure Investment Bank (AIIB) bringing us further into the Asian Century.

We love your referrals! Please continue to let your friends, family and colleagues know about the Defencewealth team and service.

Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas. – Paul Samuelson

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.

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.


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.

SSS – June 2015

RBA Cash rate:
Left on hold at 2% for the month of June. I still believe we will remain on hold until at least October/November before another potential cut. This will be heavily dependent on both inflation and unemployment data between now and then. The RBA also believes the Aussie dollar still needs to fall further from the current $0.77US mark to the low $0.70’s or high $0.60’s which may be assisted by another interest rate cut.

Tighter Bank Lending:
Banks all over have really begun tightening their lending activities to both investors and now owner-occupiers. Macquarie Bank have just recently announced 80% LVR caps on interest-only owner-occupier loans. This does surprise me but then again the lack of lending will reduce the amount of housing being built. This will in turn drive up rents which will in turn drive up capital growth which will then be the time the banks change their policies and begin mass-lending once again! We’ve been here before and this is a good thing if you can recognise it. This will take years to play out, but everything is occurring in accordance with the 18.6 year real-estate cycle.

Low Land Supply:
The RBA’s assistant governor Christopher Kent has recently highlighted in a speech that fresh land for development appears to be “unusually low.” It is most pronounced in Sydney (hence the high growth) with Adelaide the least affected. The high cost and red-tape involved in bringing land to market is prohibitive and this will never change. Therefore if you are in a position to invest in the current conditions, don’t waste it!

RBA’s Kent says drop in land supply could increase house price spike –

Speaking of land – the UK property market is now in an uptick after being decimated during the GFC. The current Duke of Westminster is worth around $27 billion mainly due to land holdings in London that have been in the family since 1677.

Gerald Grosvenor, 6th Duke of Westminster – Wikipedia, the free encyclopedia –

SE QLD Market:
Congratulations to those that have recently secured H&L packages with us up in Coomera and Pimpama! A broad overview of the Gold Coast housing market shows home values have moved 4.8% higher for houses and 3.9% higher for units over the year to March 2015. Annually, home values have been increasing since August 2013, showing an overall strengthening across the market. The south-east Queensland market as well as Cairns still remain my priority markets.

Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn’t pays it – Albert Einstein

SSS – May 2015

RBA Cash rate

As expected, the RBA dropped the official cash rate from 2.25% to 2% this month. Most lenders have responded by dropping their rates but not by the full 0.25%. This signifies a couple of things; firstly that bank margins (profit) are now being squeezed and secondly, the banks foresee a period of stability in interest rates.

I personally think we will now hold at 2% until at least Oct-Nov this year, at which time the RBA will have two quarters of economic data to better gauge how the economy is going. Rate rises in the US are now not expected until the end of the year.

Investor Lending

Over the past week, major lenders have tightened their policies on investor lending. This is in response to APRA’s (Australian Prudential Regulation Authority) concerns about the rate of house price growth in Sydney and Melbourne. In essence, higher LVR loans (80% and above) are going to be harder to come by but not impossible. I think this will be a positive for us investors in the long term as it will serve to restrict the number of new homes being built. This will force rents up and in time capital growth as demand begins to further outweigh supply with the increase in population.

Simon Norris is completely swept up with the finance landscape and we both agree the timing right now for getting into the market couldn’t be any better!

Federal Budget

Highlights from the 2015/16 budget that may interest our members:


Child Care Subsidy – The package will include a revamped Child Care Subsidy, which the government will seek to introduce from July 1, 2017. The subsidy will be on a sliding scale that depends on a household’s combined income. For households with incomes of up to approximately $65,000, the subsidy will be 85% per child of the actual child care fee or the benchmark price, whichever is lower. This will drop to 50% for incomes of approximately $170,000 and above, while those with incomes under $185,000 will no longer have a cap on the subsidy they can receive. The subsidy will mean families with combined household income of up to $165,000 will be around $30 better off a week, while those with combined household income about $170,000 will receive the same average level of support.

Defence and National Security

  • $1.2 billion in new funding for national security
  • Increase in Defence budget by $2.7 million to $31.8 billion per year
  • $750 million for overseas military operations
  • $382 million for Iraq mission
  • Defence public servant numbers to drop by 2,000 over two years
  • $10 million for extra case workers for modern veterans
  • In March the government confirmed ADF members would receive a 2 per cent pay increase per year over the next three years, above the current inflation rate of 1.7 per cent.

A $5 billion loan facility has been announced to encourage infrastructure development across Western Australia, Northern Territory, and Queensland.

Northern Queensland is expected to be one of the major beneficiaries of the facilities, as funding is made available for ports, pipelines, electricity and water infrastructure.

Additional Federal Government spending on infrastructure includes the $500 million Bruce Highway project between Brisbane and Cairns, $102 Moreton Bay Rail Link and the $10 million Coomera upgrade – Exit 54. This Coomera upgrade has cleared one of the major stumbling blocks in the development of the multi-billion dollar Coomera Town Centre. 

In addition to the infrastructure facilities, the Townsville region will also benefit from its share in the announced $26.2 million investment in permanent border clearances for Townsville and Sunshine Coast Airports. This will establish both as more permanent international airports, rather than seasonal international destinations.

Tax Variations

The ATO are now accepting 2015-16 tax variation applications. A tax variation allows you to receive your expected tax refund every fortnight as part of your salary instead of waiting until the end of the financial year. For those that have recently built new investment properties, I highly encourage you take advantage of this for the cash flow benefits.

You can personally lodge your application online or through your accountant or tax agent. Alternatively we can refer you to our preferred accounting partner. See this link for more info.

Financial Planning Scandal

In case you’re not aware, the financial planning arms of the big banks (NAB, ANZ, Westpac and Macquarie) are getting smashed with allegations of poor advice and fraud over the years. In one case, Grazier and businessman Raymond “Curly” Tatnell is suing Westpac and Macquarie Group for investing his savings in structured products. He lost $3 million. The Westpac financial planner stood to make $543,000 in fees and commissions – despite losing $3 million of his client’s money.

As the old saying goes – no one is going to look after you better than you. If you don’t understand what you’re investing in and why, then don’t do it. Our role is to help guide and facilitate your property investment journey as your success is also our success.  


It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for – Robert Kiyosaki

SSS – April 2015

RBA Cash Rate
Left on hold for April at 2.25%. This surprised many but national unemployment has dropped to 6.1% although inflation is still tracking in the low range of 2.0%. Aussie dollar is still considered high at around $0.76US. Many believe this should fall to mid $0.60US as we transition out of the mining economy and more into services such as tourism, education and agricultural exports.

For the first time in Australia’s history, Australian Government bond yields (where investors lend money to the Federal Government) went negative in April. This means that large investors were lending money at a negative interest rate. The main justification is that these large institutional investors (the big money) expect a further interest rate cut by the RBA to 2.0% very soon which would then turn their yields positive. We shall wait and see what the RBA does in May and June.

Uranium Exports

In case you missed it, our Foreign Minister Julie Bishop was in India recently to help foster an energy partnership agreement. ‘The Australian government and the Indian government are concluding the civil nuclear supply agreement. There’s also a parliamentary process to be concluded in Australia, which is a routine process. After that, uranium suppliers and buyers can negotiate.

This is very promising for Olympic Dam in SA which contains high concentrations of premium grade uranium. It’s certainly something to watch and if there is an announcement, it will bode well for the SA economy and of course land values in Adelaide.

Adelaide price growth

Adelaide’s median house price has increased by 2% for the March quarter (8% annualised). This is according to the Domain Group so expect some local news reports this week. This is particularly promising for our FHBs that have recently secured land in Adelaide!

Negative Gearing
As expected it was taken off the table for review by Tony Abbott this week.

Overall Market
We’re still concentrating on the south-east Queensland market and Cairns. Here is a link to local media reporting on the area. This is backed up by Herron Todd White who are independent national valuers in their April report. There are also opportunities in South-west Sydney but at higher price points. All these will be discussed with Catherine once you are at the asset selection stage.

QuoteKnow what you own, and know why you own it – Peter Lynch