Property the Big Opportunity!
8th of December, 2020
NOW is the time to be investing in Property
Our assessment of the current state of play is that we are currently at or past Point 4 of our Calnan Flack Economic Cycle Action Plan.
The worst of the decline is past us and we are onto the long-term expansionary phase of the cycle.
So, it is time to take action.
As our Economic Cycle Action Plan says it is time to “continue to build real-estate and share portfolios” and to “take advantage of easy credit opportunities”.
All the support, stimulus and infrastructure spending we are witnessing going on around Australia and the world for that manner, WILL manifest back into higher prices.
Billions are being spent all of which will capitalise back into property and asset prices in multiples!
This is how the Effortless Advantage works. To learn more about this concept, please click here.
If history is any guide, we can expect that greater amounts of credit will be created. Amounts like we have NEVER seen before.
Australian has official interest rates at 0.1% and they are even lower throughout many parts of the world, so its not hard to see this happening.
Many banks are currently offering rates below 2%. This is the lowest most of us have seen in our lifetimes and a massive opportunity for us all.
With average unit yields at just under 4% and houses at +3% it is not hard to make the maths add up! When you include depreciation allowances and the other add backs that smart investors obtain the figures become even more profitable.
You don’t need $1M or even hundreds and thousands of dollars – all you need is a small deposit or some equity in your home to take advantage of the coming boom in real-estate.
Australia is known for its BIG STUFF
Lets’ put the Australian market into context. We all know Aussies like things big. The Big Banana, Barramundi, Bundy Bottle, Bogong Moths, Buffalo, Bull and that’s just some of the “B”s from around Australia!
Source: WikiWookie, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons
As a kid I can still remember visiting the Big Orange at Berri in the Riverland SA, on one of those classic family holidays. It was the early 80’s after all! I am not sure why the Big Orange made such a BIG impression on me, maybe all the juice I got to drink that day, however something made it very memorable…
Needless to say Australians like things BIG and this includes our homes!
Recently the ABS released figures showing that Australia now lays claim to the BIGGEST HOUSES in the world. Bigger than NZ, UK and the US – no one has BIGGER HOUSES than Australia.
The average new house build in 2019/20 in Australia was 235.8m2 up more than 2.9% for the year, the biggest increase in 11 years.
This compares to the US (where house sizes fell again) and now averages 233.1m2.
What I found really interesting amongst the ABS data was how Australia has for the most part since 1985 averaged larger dwellings than the US.
Close inspection of the data reveals just how much our castles have grown in average size since the mid 1980’s – increasing a whopping 30%!
Its hard to imagine how we “squeezed” into a home that was only 180m2…
Yet some 11 years ago, the average size of an Ozzie McMansion was even bigger occupying nearly 250m2 of land.
It is not just our mammoth houses that are growing, the size of an average Australian apartment has hit decade highs at 136.8m2.
The Covid-19 Impact
Currently no discussion would be complete without commenting on the Covid-19 impact as many would argue that the Covid experience is only likely to drive the desired size of our homes even bigger.
It was recently reported that Telstra asked their staff about working from home and more than half said they would like to for an average of 2.5 days per week.
With more people working from home and spending more leisure time locked in their castles, the thinking is that they will want separate areas to cater for their “work from home” WFH requirements as well as increased entertainment areas.
Research indicates that the trend for increased house sizes is not new and has been a phenomenon for some time. There is a desire for increased spaces like:
- Butlers pantry
- Mud rooms (storage for muddy boots & wet clothing)
- Home theatres
So, it’s understandable why the size of our homes have continued to grow.
When you consider those who are building and their need/want for 4 bedrooms, master ensuite, walk in robes, alfresco dining to comfortably accommodate the average 2.5 people that occupy the dwelling and their guests the necessity for increased dwelling sizes becomes more obvious.
The point I’m trying to make is that although COVID-19 is thought to add weight to the argument for the need for increased home sizes, the trend was already well and truly established.
The Great Covid-19 Property Rebound
In May 2020 HSBC analysts were forecasting Sydney house prices to fall 15% over the coming year and Melbourne 17%.
At the same time the Commonwealth Bank was expecting falls of 11% over the next 12 months as much as 32% over the next three years.
This was at a time that they had approved repayment deferrals on 71,000 business loans (worth $15.2 billion) 144,000 home loans (worth $50 billion) and a further 25,000 personal loans.
AMP Capital’s Shane Oliver was all over the media telling us “Property prices will Crash 20%” meanwhile managing director of SQM Research, Louis Christopher, was predicting “about a 30%” decline.
How wrong they were.
We have continually said that while this crisis remains a “Health Crisis” and NOT a “Credit Crisis” property prices will not crash, and that the economies will be stimulated back into boom territory!
These banks and commentators have been shown to be wrong and have now changed their outlook to that of a BOOM Time.
Below is a great chart showing price movements of the major capital cities throughout this health crisis – the price movement is almost textbook for a mid-cycle decline. What has been VERY different this mid-cycle is the speed at which it has occurred and then recovered.
There is nothing to fear here!
Property Investors Free Lunch
This all adds up to a “Free Lunch” for property investors and the Effortless Advantage is your ticket to the “Property Investors Free Lunch”.
Like everything, there are still plenty of risks for property investors.
As the property market heats up available properties will become more limited and there will be an explosion in those wanting to buy. In these circumstances its easy for your emotions to take over and you could overpay for a property.
Most property investors buy properties within a close proximity to where they live, and why not? They clearly like the suburb. They are familiar with it?
But is it the best investment location?
Does the property match the necessary demographics for long term capital growth?
Speak with us, we can help …
How can you organise your financial affairs to maximise your assets. Determine who (what entity) should own your investment property(s). Explore what are the taxation, litigation and estate planning implications for this decision.
Speak with us, we can help …
With literally 100’s of lending institutions and 1,000s of different products as a consumer it is almost impossible to ensure that you are getting the best deal. Currently the interest rate and total cost that borrowers are paying greatly vary. In fact often there can be $1,000s of dollars difference between what you are currently paying for a loan and what you could be.
What is your financial strategy? Does it allow you to not only purchase multiple properties but to do so in a tax effective manner? Does your financial strategy cater for tax effective buffers for emergency and unforeseen surprises?
Speak with us, we can help you review your lending arrangements.
Property is a long-term investment that needs strategic thought and advice. Many investors never stop to consider the impact of their investment decisions within the context of their personal goals and financial strategy.
Collect your Invitation Here:
The Calnan Flack team would like to help you become a property investor or increase your property portfolio. We would like to help you implement your own financial strategy within the context of your own goals, lifestyle and circumstances, the things that are important to you and within the framework of the economic cycle.
In doing so you too will gain your very own ticket to the “Property Investors Free Lunch”.
It is up to you! Whilst you don’t need to rush to buy I suggest it is time to rush to plan.
Click the “Lets Get Started” link and we can start your property investment plan together – maybe over lunch.