2009 Investment Wrap Up
Monday, December 21st, 2009
2009 was certainly a very, very interesting year!!
We started the year in the grips of a Global Financial Crisis that some feared would see the whole world plunged into economic oblivion. You may recall “Professor” Steve Keen, for example, took every media opportunity to frighten us with his dire predictions of economic calamity, predicting property prices would slump 40% .
Of course, “Mr Doomsday” was way off the mark again. Meanwhile the counter-cyclical visionaries jumped in and snapped up bargains and watched their portfolio values swell.
“Green Shoots”
Regular speaker at our monthly Platinum Group sessions, Jeff Oughton (economist) told us of the first signs of economic ‘green shoots’ he was picking up at the May session, when he returned in July he was positively glowing with promises of a strong rebound which is exactly what happened as Melbourne’s amazing property market staged a stunning recovery.
Staggering Property Rebound
Some of our clients have seen their property values soar by as much as a $100K in the latter part of the year, staggering growth as demand outstripped supply, not even 3 consecutive rate hikes could curb buyer’s insatiable appetite for property. It seems the six months lull in the market created so much tension we could cope no longer and dived headlong back into the market and our love affair with property resumed with gusto!
I understand “Professor” Keene did sell his property, so I guess he’s renting… and watching the value of his rented home boom. Wouldn’t you love to be his landlord!
We can now look forward to an even more interesting year next year as the forecasters try to predict the “post first home buyers grant bonus” era, will the market settle and grow at a more sustainable level or will the buying frenzy continue, I’m leaning towards the former.
Rate Hikes
What was inconceivable just six months ago became a reality in October when the Reserve Bank embarked on an almost unprecedented campaign of rate hikes where we watched aghast as two increases more followed in consecutive months, no-one can remember the last time the RBA pushed rates up in three consecutive months.
Of course, not content with 75 points (0.75%) the banks felt compelled to add to the pain with Westpac taking top billing with its own 45 point (0.45%) bonus hike, Mr Swan was not happy and Mrs Kelly has been defending ever since!!
What make these rises all the more notable is that they occurred just 12 months after the RBA dragged rates down at historically fast levels of 100 points (1%) at a time until they sank to 50 year lows producing a cash rate of just 3% giving us access to rates as low as a little under 5%.
But, of course the banks couldn’t cope with that because people started to lock in rates as low as 4.99% just this time last year so in the second quarter the banks started pushing their fixed rates up at such a frantic pace it soon became untenable to lock anything in.
As we wind up for Christmas we are sitting on a cash rate of 3.75% and retail (the rate you can access) of a little over 6%, still pretty good rates actually.
Residex Report
I have also included a Residex Report that reveals some very interesting property investment information, particularly for the Melbourne market, for example:
- The old adage that you buy houses for growth and units for yield is dispelled as units outstripped house price gains over the past 12 months while they almost matched houses over the past 10 years
- Melbourne is judged the best Australian capital city to invest in for risk/return
- Continued accelerated property growth has out-stripped rental growth forcing yields down from the mid 7%’s in 1999 to the mid 4%’s today, but what property investors have lost in yields is little compared to the huge capital gains they’d enjoyed, particularly in Melbourne where even flats have doubled in around 7 years over the past 10 years.
Useful Tools
Finally, we are working on a new research tool designed for property investors to help them find the very best property. We will be releasing this tool early next year.
Free Consultation
Don’t forget, if you want to review your circumstances and plan for the coming year, you are invited to call Andrew on 9509 8911 for a complimentary 45 mintues consultation.
On behalf of the team here at Investors Edge, I wish you and your family a very merry Christmas and a wonderful new year.
Our very best wishes,
Andrew, Helen, Tony and Heather
If you would like help with any of the topics covered in this article, call 9509 8911 or email us on info@investorsedgefinance.com.au to book your consultation with Investors Edge Finance today.