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Please don't be daunted by the size of
this newsletter - save it and read it later as there is a lot of
really relevant information I don't want you to miss out on.
Included in this newsletter are predictions of further rate
reductions, savings on conveyancing costs, leading Australian
commentators views on where property prices are headed and details
on one of the best valued property courses
available.
We are all winners this Melbourne Cup
day as the RBA has slashed interest rates by another 0.75%.
According to Westpac's Bill Evans we should also anticipate another drop in interest rates by
Christmas.
Much has been happening in the in the
economy and property market in recent weeks. I’ve attended many
seminars and presentations from Australia’s leading
economists and property forecasters and over the coming weeks I will
be sharing this information and their presentations. Please see a
few of their comments in the section below.
Everything I have
seen at these seminars predicts that the RBA cash rate ( not
mortgage rate) will be below 5% by mid next year, currently the cash
rate is 5.25% with todays drop. As a comparison standard variable
rates at the moment are expected to be on average 7.6%. However we
will have to wait and see how much of the reduction will be passed
on by lenders. Stop Press: CBA
announced at 3pm they would pass on 0.58%.
The
general consensus from the commentators has been that our
American-centric news reporters are selling papers based on
sensational stories. Whereas in fact the foundation of the
Australian economy is strong, indicating there will be a slow down
of growth but no recession. Further these same commentators claim
our house prices are almost stable and that we are through the worse
of the economic storm. Australian Bureau of Statistic's (ABS) house
price index released yesterday, showed house prices fell by 1.8 per
cent on average in the three months to September for an annual
growth rate of just 2.8 per cent. This figure is based on the
weighted average of the eight capital cities.
Our saviour is
immigration. In 2007, the greatest number ever (110,000) of
immigrants arrived in Australia. Most of these
new residents are from China and India. KPMG’s demographic
forecaster, Bernard Salt presented this week that unless the number
of immigrants is increased to 180,000, the Australian economy will
be in trouble in ten years time. Why? Not because of the credit
crunch, but because more people are exiting the labour market than
entering it. As a direct result consumption levels will drop and so
too will employment levels, disposable income and property prices.
New immigrants will need somewhere to live - this is one
reason why house prices will not drop. Coupled with this, our
interest rates have been at a more realistic market level (over 9%),
whilst UK and US rates have been
around 1% (US Federal Bank dropped rates to 0.5% last week).
Australians have already been able to work through their mortgage
stress and there is still a long way rates can drop to help underpin
growth and recovery for our economy. Coupled with the fact that we
already have a deficit of housing available and rising rents
Australia has good
underlying strength.
I attended a BIS Shrapnel outlook for
the property market lecture last week. I have been tracking their
predictions over the last five years and in my opinion this group is
one of the more negative property market commentators. I will review
their report and provide more details in coming weeks and make it
available, but the most positive news provided in the presentation
was their prediction that in the next three years, Brisbane, Sydney
and Melbourne will experience 15-17% in overall growth.
So
there is growth potential for Australian property. There is also the
opportunity to pickup a bargain, at the low and high end of the
market. There are those in the financial industry who will not be
getting their bonus this year and those who have high margin loans
are really feeling the pinch. Expect to find that traditional
affluent suburbs will have a number of bargains on the market.
Prices will start to experience upward pressure especially in the
sub $500,000 mark, as those who can access the higher FHOG grant of
$14k will drive prices up in that market segment.
As you
know at Investors Choice Mortgages we endeavor to add value to our
clients’ experience, so it is with great pleasure that I can tell
you that I have negotiated savings with two solicitors firms –
Michael Sing Solicitors and PTW Law. Furthermore Michael Sing
Solicitors is running an extra special till the end of the year
offering a conveyancing fee of $400 plus GST and outlays to all
First Home Buyers. You can contact them directly at
www.mslawyers.com.au. or alternatively ssing@mslawyers.com.au to
access this special. Ongoing price reductions on conveyancing will
be available to ICM clients.
Combined with the discounts we
have negotiated with two national quantity surveyors companies,
offering depreciation schedules for investors we continue to look
for additional resources that add additional value to our clients’
experience.
We have had an incredible response to our Spring
Residex offer. As a reminder – we offered free Residex reports,
valued at $95 each, to our clients when they are re-financing or
purchasing. As a Spring special, I am extending this offer for a
free Residex to members of this newsletter for one more week only.
Please send your request along with the address of the property or
the Suburb you would like data on to askus@investorschoice.com.au
I
hope to see you at the upcoming Property Investing course being held
in Sydney, Melbourne and
Brisbane.
Jane
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InvestKit
As a Newsletter
member you also have access to the InvestKit containing easy
to use spreadsheets for researching and locating the right
property.
If you haven’t yet looked inside the Invest
Kit to see what’s on offer, don’t delay because you could be
missing out on something that will make a difference to your
investment strategy.
Later this month we are adding the
BIS Shrapnel October 2008 Economic Outlook when it becomes
available
This month we added a short
presentation on one way to access equity in your
home
This link is not active for those who are not
members of the newsletter.
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Hot
Bread and Property - not so different when you are starting
out
 Tom Potter took out a $8,000 loan and
started his first hot bread shop in Alice
Springs. 18 months ago he sold his Eagles Boys
business, which operates in three countries and has a $150
million turnover. (see picture Tom and Jane)
Tom
presented at a recent seminar I attended. One of the things
Tom said that really struck me was an observation from his
first job. Tom's daily task for the first two years of his
bakers’ apprenticeship was to stack and unstack 11,000 bread
tins.
He said "the first job I ever had was also the
worst but it was the best thing that ever happened to me".
I believe buying your first home or investment
property is exactly the same. It takes a lot of hard work and
time to gain the knowledge required but once you have it you
can apply it again and again. It is hard work! But it gets
easier.
Over the last few years I have shared my
investing experience at seminars around the country. Often
after these 40 minute talks I am asked for specific detail and
breakdown of our exact strategies and even websites we use to
research property. So in response to this request I have put
together a 6 hour course that leaves nothing out.
With
eight investment properties, over the last 10 years we have
researched literally thousands of properties. The constant
mantra that has kept me focused is 'If it was easy everyone
would do it.' I am sure Tom Potter felt the same way when he
was challenging Pizza Hut.
The courses will be run in
Sydney, Melbourne and Brisbane over the next six weeks. I have
called the course 'Renovation for Profit' however this may be
a misleading title, as anyone, be they first home buyer,
upgrader or investor will benefit from the content in this
course, regardless of whether they are considering renovating
or not.
Many people are watching the value of their
superannuation dwindle. Others are scared off buying an
investment due to the US recession.
Others are looking only at the sensational news headlines and
not seeing past these to the opportunities. As one market
commentator recently challenged property trusts are down 60%,
but do you think commercial property has lost 60% of its
value? No, of course not.
In my mind the clever
property buyer is always looking at their long term plan. You
should consider the risk of your purchase and aim to minimise
it by putting in place mitigating strategies. There include,
buying below market value, in an area with capital growth,
with good rental returns and the ability to add value and gain
equity.
Regardless of who you are or what you are
buying you need the following when looking at a
purchase:-
* a game plan to understand what the long
term goal is and how this property fits into that
plan
* Due diligence and research when buying the
property, how to access demographics, rental statistics,
predicted growth rates etc
* and your exit strategy. If
it is to sell the property, know who your potential buyers are
or if leveraging to release equity for the next purchase, you
need to understand the implications of your refinance
options.
In my view one of the quickest ways to add
value is to buy below the market price and then increase value
through renovation. Even if you don't see yourself as a
renovator, it is a way to minimise risk and give you a choice
of exit strategies.
Although I cover all the topics on
locating a property and determining exit strategy, I also
concentrate specifically on how you can assess a property to
buy with a potential renovation in mind. This may be something
you never want to do yourself and rather leave it for the next
buyer to do. The benefit of this is that you have increased
the pool of those who will be interested in buying the
property and improved your odds of resale.
Together
with templates and checklists for inspections this course
leaves nothing out; I know because those who have paid
thousands to attend other courses, have also attended this one
and have told me so.
The dates are now set. If you
want to register please email us and we will send PayPal
details. The course will cost just $99.
PS. There are
only 10 seats left in Melbourne. I have restricted
numbers so we can hold discussions throughout the day. I hope
to see you there.
For a full course profile visit the
website.
Renovating for Profit Course
Profile |
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Renovation
Courses Details
Melbourne
Course
Saturday 15th November 10-4pm
2nd floor,
181 Bay
Street, Brighton, VIC, 3186
Cost $99, email
us for paypal instructions
Bring pen paper and lunch.
10
spots left!
Brisbane
Course
Saturday, 13th December 10am - 4pm
Diana
Plaza Hotel 12 Annerley Rd, Woolloongabba Brisbane
Cost
$99, email us for paypal instructions
Bring pen paper and
lunch
Sydney
Courses
Saturday 22nd November
Sydney
Community
College Leichhardt
10am -
4pm
Contact the College for Bookings
Saturday 6th
December
Mosman Community
College
10am - 4pm
Contact
the College for Bookings
Here are some comments from
recent course participants:-
I have been to quite a number of
courses over the past year, with most being a lot more
expensive and none have provided me with the practical
information I can use to find and renovate my next investment
property. (DE, Sydney)
Far more was covered than I
expected! I wish I had done this course years ago! (MT,
Sydney)
Jane covered all the bits and pieces in
‘layman’s’ terms with real experiences. Understanding the
little things that can save money and make a difference. (NH,
Sydney)
Great information - tips and tricks, areas to
maximise profit, common mistakes, things to be careful of.
(BB, Sydney)
The course was fantastic. I learnt a great
deal. (SM,
Sydney) |
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Some
examples of current market commentary
Saul
Eslake, ANZ Head Economist (Prepared as a briefing for ANZ CEO
Mike Smith’s meeting with the Prime Minister and Treasurer on
23rd October 2008)
" We do not expect significant,
across-the-board, declines in residential property prices,
despite the fact that Australian property prices are
undoubtedly high (relative to incomes or rents) by historical
standards and, superficially at least, by historical
standards. Unlike the US or the
UK, Australia does not
have an underlying over-supply of housing; nor is effective
supply being boosted by large numbers of dwellings on the
market for sale at any price, by owners unable to service
their mortgages or by mortgagees-in-possession anxious to
recoup at least some of the value of their outstanding
principal. If Australian home-buyers did not fall behind in
their mortgage repayments on the same scale as American or (to
a lesser extent) British home-buyers in the face of much
higher mortgage rates than in America or Britain, it is hard
to see why they should do so now that mortgage rate are
declining sharply (provided that unemployment does not
increase sharply)."
An Update on Household Finances -
Ric Battellino, Deputy Governor, 7th ITSA Bankruptcy Congress,
Sydney - 30 October 2008
"There are reasons, however, to
believe that the Australian housing market will not follow the
US market to the
same degree. Let me run through some of these
reasons."
Essentially there are 3 reasons.
1. the
cycle in the Australian housing market, rather than following
the US market, is in fact at a more advanced stage; it is
probably leading the US market by three
years or so. The Australian housing market was at its hottest
in 2003, whereas the US market peaked in
2006.
2. In the US, the rise in house prices elicited a
very strong supply response so that, by the end of 2007, there
was almost one-year’s supply of newly built unsold houses
overhanging the market. US house prices stopped rising
essentially because the supply of houses overtook
demand.
3. Finally an important difference between
Australia and the
US is in the groups
that the lenders targeted, and in the loan terms on offer. In
Australia, the
lending boom was concentrated on existing home owners who
traded up to bigger and better houses and bought investment
properties. Many of these were people in their 40s and 50s who
previously had low levels of debt. At the end of the boom, the
home ownership rate in Australia was no
different to that at the start; in both cases about 70 per
cent.
To read on please go to a copy of the
talk on the RBA website
RBA Link to Deputy Governors Speech
30/10/08 |
A
final comment
If there is
any way the team at Investors Choice Mortgages can assist you,
regardless how big or small, please get in contact.
Until
next time, I wish you prosperous investing and happy house
hunting.
Jane
PS: at Investors Choice we believe in
sharing our systems, information and resources. Our website is
continually updated to reflect any new information we think you
might find of benefit. Check out the website at
www.investorschoice.com.au
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Disclaimer:
You should always speak to a financial planner or accountant about
your particular circumstances, the hints mentioned here are for
general discussion only and do not relate to your particular
circumstances
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