On Monday the Queensland government’s building boost grant came into effect. You can use this “$10,000 Grant To Pay Off Personal Debt”, take an overseas trip or whatever else you decide! You must be at least 18 years of age, an Australian citizen or resident with some other qualifying conditions that are not difficult for most of us to comply with. I’m happy to explain this in more detail to those interested.
Warren Buffett, arguably one of the most successful investors of our time, says to ‘Be fearful when others are greedy and greedy when others are fearful’. Essentially he’s saying what many know but few practice… be counter-cyclical.
Regular readers of my newsletter would know that I fly in the face of popular thinking on a range of topics. These include things like ‘It’s not land that determines capital growth’ and ‘Why are you paying your property shortfall from personal funds?’. A ‘hot issue’ where my opinion has been at odds with economists and the mainstream media is that of ‘Interest Rates‘.
By way of background…
From October 2008 to April 2009 (incl.) I correctly predicted what the Reserve Bank (RBA) would do with interest rates following each of their six board meetings. My predictions and the reasons I gave were at odds with popular opinion on most occasions:
- Oct ’08 – Interest rates dropped by 1.0%
- Nov ’08 – Interest rates dropped by 0.75%
- Dec ’08 – Interest rates dropped by 0.1%
- Jan ’09 – Interest rates held steady as the RBA doesn’t meet in January
- Feb ’09 – Interest rates dropped by 1.0%
- Mar ’09- Interest rates on hold
- Apr ’09 – Interest rates dropped by 0.25%
NB: I got May 2009 wrong when I predicted another drop of 0.25%… although I still believe there was justification for one more drop at the time. I bring this up now because again (or should I say ‘still’) we find ourselves in a time where there are mixed messages that are sensational, exaggerated and incorrect.
Let me know what’s on your mind and how I can assist you >>>here
Anything For A Headline
Surely the past three plus years confirms one of my central themes of the past decade… Quit buying into sensational headlines! They, and the so-called experts they quote, are wrong – over and over again!
Have you noticed that continual publication of sensation wrong predictions are always reported as authoritative and final?
We have continually been told…
“Rates are likely to go up when the reserve meets next week”
Then when rates stay on hold we hear…
“The reserve bank left rates on hold for another month but borrowers should prepare themselves for at least two or three rises between now and the end of the year”.
They just go on and on and on! So why do people keep buying into it?
Rates Aren’t Going Up!
I have no more seen a compelling reason for a rate rise this year than I have seen a pig flying. Sure inflation has been a little higher than the RBA would like but there are a lot of one-off factors (e.g. summer storms destroying crops) and only one sector of the economy is expanding right now. Most Australians are recovering, rebuilding or just managing to hold it together. The mining sector is going strong… but to even leave rates where they are is asking for trouble throughout the wider economy.
When it comes to interest rates, Bill Evans from Westpac, who believes we will see a rate cut this year, is the only economist I have heard make sense in recent times. We could in fact see two or three rate cuts before too long.
It’s up to you to decide what newspaper or opinion you listen to (or not) but one thing is for sure. What you do will impact on your future so stop listening to those who keep getting it wrong.
Here are some of my predictions:
- The next interest rate movement will be down and possibly by half a % point. In my opinion the RBA is lagging and in need of ‘catch up’
- The Brisbane and Perth property markets have bottomed and will soon begin to rise; Brisbane first
- Sydney is still growing but nearing its peak
- Darwin, Canberra and Melbourne have all peaked, will soften and go sideways for a while
Natural Storms vs. Perfect Storm
Let’s be brutally honest, the impact of the natural storms last summer was to kick the life out of confidence in the Queensland property market; which has been pretty flat since before the GFC. Property prices having well and truly bottomed out will soon begin to rebound for a variety of reasons that I refer to as a ‘perfect storm’.
WARNING: Look out for the next wave of the prophet of doom! They will sound convincing and their pessimism will be reported as fact! Nevertheless, a number of variables are starting to come together right now that will make for this perfect storm. Opportunity is staring you in the face but don’t leave it until it’s obvious and everyone is reporting those changes that I am telling you are coming. Doing so will be to miss the ideal entry point.
- Falling interest rates
- Low property prices in Queensland lagging other cities
- Motivated developers keen to sell the last of their remaining stock
- Massive reconstruction spending (homes and infrastructure)
- Strengthening rental demand drawing home owners and investors back into the market
- Other property markets having peaked (or about to peek)
- Massive new investment into mining (and thus employment growth)
Brisbane / SEQ and Perth are my picks of the next markets to move. The $10,000 building boost in Qld, along with the billions being spent on post storm reconstruction and the very low supply of new stock in the pipeline makes parts of South East Queensland very appealing on a broad scale. Investors turning from those markets that have peaked will also have a big impact.
The Stock Market
Stock market volatility produces winners and losers and is again making a lot of people very nervous. I expect to see a lot of people cash in on their retail and industry funds and roll the balance into a self managed fund where they will leverage into residential property investment. Remember the $10,000 building boost would be a welcome addition to someone’s superannuation balance right now!
Those of us (me included) waiting to realise new equity in our existing Qld property portfolios should soon have our patience rewarded. For all the reasons cited, especially the $10,000 building boost, the fire that is being lit under the Brisbane property market is about to be fanned. I include the Perth market as a property hot spot to watch… although some of the factors mentioned above do not apply there.
- Sound education
- Right finance structure
- Well researched property for you or your superannuation fund
mrd can assist you. Let me know what’s on your mind >>>here
Happy Investing,
Nick Lockhart
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