Latest NewsMarch 2008 NewsletterDear Fellow Investors Bad News Can Mean Good News In many respects 2008 is a year that’s been turned upside down and that is filled with contradictions and uncertainty. The sub-prime crisis in the US has wreaked havoc in stock markets, financial institutions and property markets across the globe. Bear Stearns is the latest in a growing list of long-established firms to feel the pain due to what has gone before. And while the Governor of the US Federal Reserve, Ben Bernanke, pursues ever more aggressive measures to stave off a recession in that country, in Australia we have exactly the opposite situation: the Reserve Bank has recently increased the Bank Rate for the 12’th time in succession to 7.25% in an effort to avoid a breakout in inflation where the primary cause lies in the voracious appetite of China and India for our natural resources. So what to make of it all? In an environment characterised by risk and confusion, it’s important to avoid any impulsive short-term moves that would serve to support the old adage, ‘decide in haste, repent at leisure’. In our view the fundamentals affecting the investment property market remain positive despite the decline in the stock-market, rising oil prices, the credit squeeze, rising interest rates and the news of falling business and consumer confidence. Key issues that balance the equation include:
As we see it, while the value of your investment properties might not continue to grow at quite the same rate as in previous years, there are many factors that serve to underpin the current values and that will lead to a continuation of positive trends in the years ahead. Some of the key figures to remember include the undersupply of new accommodation relative to demand, which, according to many sources, is about 30,000 dwellings a year, for the last 5 years, giving a current backlog of some 150,000 homes, and increasing by the month. It’s no wonder the Rudd Government is looking at new incentives to attract investors into the provision of new forms of affordable accommodation; there is an accommodation crisis brewing. While this is really tough for all of those on the outside of the market, for those who own their own property and who have been able to acquire investment property, the increasing gap between supply and demand can only mean increases in house prices and rental returns in the years ahead. The fundamental issue for many property investors, however, will be where they chose to invest. In the case of McCarthy Group customers who have invested in quality products in prime growth locations, we see no risk visible on the horizon. In summary, despite all the turmoil and bad news that you read about every day, the overall impact should prove to be positive for those with investment property in solid locations. Capital City Property Growth Rates Figures recently released by Residex underline how property markets performed over the past year. Once again it must be stressed that these figures are averages, and that within each city, there could well be suburbs that went backwards through the same period (typically suburbs that are further from the city centres and that are the most price-inelastic in terms of the increased conditions of mortgage stress).
Source: Residex
A reminder to those who have not submitted their 2006/07 Tax Returns, time is running out. Please contact me and arrange a time for us to get together. 2008 Tax Variations I have lodged many amended Variations for a variety of reasons such as:
If any of the above apply to you and you think you need to lodge an amended Variation, please contact me. A Dinner Party with Attitude Over 300 McCarthy Group customers and guests will gather at Star City on Friday, 28 March 2008 to celebrate our 9’th party at a celebration Dinner Party with Attitude where renowned businessman and motivational speaker Justin Herald will be our special guest. The evening will be an opportunity for like-minded property investors to get together to celebrate the positive attitudes and actions taken in the past that have led to positive results today and that have set up the very real chance of financial freedom and independence in the future. If you haven’t responded to the invitation, it’s not too late: call the McCarthy Group Events team on (02) 9687 3601 or email events@mcccarthygroup.com.au and confirm your attendance. Limited numbers of guests can still be accommodated.
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