Doom and Gloom - I assume!
When I was a young guy in the 70s, there were lots of cults, fads and scenes etc. One outfit were the "survivalists" who decided to go bush, get off the grid and live off the land. I admit I flirted with this idea and lifestyle for a while myself. We are having a revival of the survivalists now with the present global meltdown reminiscent of the imminent nuclear meltdown we all expected to happen at anytime in the 70s. I am not downplaying the present financial collapse and "Yes, this is serious Mum!". But the tide goes in and the tide goes out. We had a huge equity bubble with rising asset prices and liquidity and now we are having an equally huge negative bubble to balance it out.
But unlike the 70s, today we have two extra turbo driven machines that make all things twice as extreme - a sensationalist media and the internet. The media is out of control and I notice myself when I allow it in to my subconscious too much it takes over my judgement and I become reactive. The internet is great and can help in bringing major positive changes like the election of Barak Obama. However the amount of information we need to process is demanding and it allows a format to many people and opinions and not all are completely productive - yes people like me you may scoff!
Yes, this is serious Mum!
But the latest tumble on the stock market is an indication that we still have a long way to go before we are out of the woods. It has wiped out all of the gains from the last 7 years and is now testing new lows. Those who thought that the bottom had been reached when it hovered around the 3350 mark and reentered the market are now feeling chastened. So it looks like we are not in for a quick S-bend bottom turn in the market and it will remain in wobbly land for some time - like the rest of 2009 at least. Let us hope that this is a major clean up of some aspects of the ugly face of capitalism and the "greed is good" era.
Is property on the way back?
While the stock market is still wobbly, there are signs that the property market is looking stronger. The bottom end of the market (under $500k) is still going gang busters due to the success of the First Home Owners Grant. Over a quarter of the new homes built last year and almost 70% of the sales in the December quarter are getting some financial assistance through FHOG. There is some talk that the government may extend it as part of there stimulus package.
Here are just a few of the pundits spruiking up property:
- Watch the editor BRW predicting that property is on the rise: http://media.domain.com.au/?rid=46432&s_rid=FHBG_Video
- Australian Property Monitors came out with the 50 Hot spots for units and houses - Ballina houses made the list.
- Michael Matusik, respected property analyst, was asked recently at an Urban Development Institute of Australia (UDIA) function if the property market has bottomed. He said, 'If you look at resale values, very much so. The slide in the property market had bottomed and a doubling in the growth [rate] of home prices is expected over the next 2 years."
_ Sydney property Guru John McGrath says: "To my mind, the move in interest rates is the defining factor for investors. Eighteen months ago, investment properties were financed at 9.25% and grossing yields of 4%, but now the mortgage rate is about 5.2% and some gross rents in Sydney are at 5.25% or more.”
The Investment Clock
Speaking of pundits and the ebb and flow of cycles - it may be a good time to revisit the investment clock. Pundits are suggesting we are currently somewhere between 7 and 8 o'clock - falling interest rates and rising share prices. Many are also asking the value of such a shorthand metaphor, it may bounce around the clock at random and we may be stuck between 7 and 8 for some time.
Other interesting links:
Fixed rates over variable
- A lot of people are curious about getting out of their fixed rate and getting back into a variable rate since rates have tumbled so much. Yes it does look attractive but in some cases it may not be viable as the fee to exit a fixed rate can be very prohibitive. If you want to look into it some more go to this link. If you would like to talk about it some more then don't hesitate to call us.
Running the numbers:
- Keep this calculator page bookmarked for any future time you want to know anything about what the costs are around home purchase. There is one section comparing two home loans against each other. Bring your choice to us and we will run the numbers for you. If your other option is better - well and good and we will be gratefull that you have shown us a better option. Calculators
How to pick up a bargain:
This link is interesting if you are in the market for a new home or investment property. It provides some good info on how to proceed. One is to be well prepared and have finance and strategy in place before launching into the market. Call us first and we can get you sorted before you start the search. Good info
Auction or not to Auction.
The pros and cons of going to auction either as a seller or a buyer is a big subject and can vary to each individual case. An auction gives the seller the advantage of an outcome in a short time but in a market like this is not often the outcome you may want. I think there are definite advantages of going to an auction as a buyer at present as it is possible to pick up a bargain. However the new rules around bidding at auction can seem daunting - especially the need to be fully financed and no cooling off period. Again speak to us if you need help in this area. Here is a link that outlines some rules around auctions: Fair Trading
?