mrd

Do you love surprises? I don’t as a rule because they often come packaged up as problems!

The best thing we can do with a problem is rename it! It’s not a problem, it’s a “challenge”… and with every challenge comes an opportunity to grow!

“Those who remain flexible rarely get bent out of shape”!

When Katrina and I settled our last property purchase we were without a tenant for almost 4 weeks! Given the housing shortage, we were very surprised.

So why did it take that long for us to secure a tenant?

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Australia has about 1.6 million individual residential property investors, according to the Australian Taxation Office – and most of them would be pretty happy.

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Last week the Reserve Bank of Australia (RBA) made the decision at it’s monthly board meeting to leave the official cash rate on hold. That means no adjustment to interest rates this month.

But Did The RBA Get It Wrong?

It will be interesting to watch what they do with interest rates in the months ahead. Their actions will be an indication of whether this months decision to leave rates on hold was the right one or not.

At the beginning of 2008 the RBA put interest rates up twice. At the time the opposition argued that the decision to do so was wrong and a reaction to Kevin Rudd & Wayne Swan talking up inflation; citing it as the # 1 enemy to go after. What they failed to recognise was that the negative economic impact coming out of the USA had already begun to work its way through the system and here in Australia the economic slowdown was just about to bite.

The numerous interest rate cuts later in the year is clear evidence that monetary policy in the early part of 2008 was wrong.

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There are many people involved in building a property, bringing it to market and eventual settlement.  Builders, planners, architects, marketing groups, purchasers, finance brokers, banks… and the list goes on. All these people are at the mercy of one person’s opinion.

The Valuer!!!

The term “Valuer” is often misleading.  Many people assume, due to the label “Valuer” that this person is going to mathematically compute a recommended retail price for a property.  Nothing of the sort!  The term “Valuer”, when dealing with a financier, refers to someone who assesses the perceived risk involved in a particular transaction.  There are many factors involved that have nothing to do with the property itself.  The biggest single factor in any assessment is the opinion of that one person named “Valuer”.  It is not uncommon for opinions between valuers to differ by 10% or more on the same property.  The property is the same, they both have access to the same documentation and historical data but they come back with two vastly different numbers.  The only variable between them is their opinion.

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Over the past 8 years or so speaking with all types of people on the subject of investing in property, many, generally new to investing, ask me the “what if” questions. My broad base of experience has meant my answers have generally put their minds at ease. Two questions, however, that I lacked a good solid answer for were:

1. How good will your portfolio be if we have another world war?
2. How good will your portfolio be if we have a worldwide recession or depression?

Well, with regards to Q 1, I still have no concrete answer for, and hopefully never will. With respect to Q 2, however, I can now (i.e. only now) say from experience… “It’s all ok”!

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At the peak of the interest rate cycle the standard variable of the big 4 banks was 9.57%. Assuming you took up the offer of a professional package with the banks and qualified for the full 0.7% discount your interest rate would have been 8.87%. For a peak rate, that isn’t too bad considering long term history. I recall buying my first home in 1994 when the rates had come down to a low 10.5%. They then dropped to 9.5% and I was dancing with joy at how much money I was saving and how cheap interest rates were.

How times have changed.

To demonstrate how the changes in interest rates affect your holding costs I will use the properties at Endeavour Gardens as an example…

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Each year hundreds of thousands of homebuyers nationwide debate the merits of fixed versus variable rates when it comes to getting their home loan.

The current global market volatility and recent interest rate hikes have heightened interest in the debate leading to even more rate scrutiny.

Homebuyers are now more aware that loan finance decisions should be thoroughly explored. As a result, they are seeking the advice of home loan specialists who can help prioritise goals, examine financial circumstances, assess need for security and, ultimately, decide which side to take in the Great Rate Debate.

Commonwealth Banks Head of Retail Products, Michael Cant, takes the role of adjudicator to mediate the case between fixed and variable rates.

What is the difference between fixed and variable?

>>>> The Great Rate Debate – Yahoo7 Money Matters.

The Reserve Bank of Australia (RBA) will meet for the first time this year, next Tuesday. While it’s difficult to know exactly what they will do with official interest rates, I expect another generous reduction to be handed out; probably 1%; but certainly at least 0.75%.

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QUEENSLANDS property buyers enjoy the lowest stamp duty in the nation, despite shelling out $9 billion to the State Government in just five years.

A landmark BankWest study to be released today reveals Queensland has the lowest stamp duty taxes in the nation but the median bill still increased by 151 per cent between 2003-2008 – despite household incomes only increasing by 39 per cent.

The report again highlights why southerners are moving to Queensland in droves.

Estimates show Sydney and Melbourne buyers need almost three months salary to afford stamp duty for median house prices, while those in Brisbane only need a month.

In Queensland, the median stamp duty bill is about $5000 while the most expensive is $17,888 in the ACT.

>>>> Queensland cheapest for stamp duty, lures southern buyers | The Courier-Mail.

We constantly track and analyse trends in the property market.  It’s a time-consuming and expensive exercise and you might expect us to guard our findings jealously.  Not so.  We share our information freely and it comes in a variety of useful formats.

Of course, the market is changing all the time, but if you want to look back at what we’ve said about a particular subject in the past, you can use our search facility to look up articles by topic, date or format.