A lot of points to ponder …… What is happening to the economy, in the property market, to interest rates ….. is this the right time to buy…. What do you think …..
It is July already …. Start of a new financial year. A lot has been happening, in the property / mortgage / financial services market, over the last few months.
Some say the property market is down and will stay there, others say it is flat, and others talk of an upswing underway as we speak !!!! What do you know ?
Interest rates have been stepped down, and we have seen a trend by the major banks to break away from following the RBA set rates. Various lenders are positioning their products with variable & fixed interest rates to win over you, the borrower, and your business towards them. What do you do & when ?
As usual, there is tremendous amounts of Data shouting at you, coming via Newsprint (Newspapers, Magazines, Newsletters, etc.), Audio & Visual Media (Radio, TV, Advertisements, etc.), Online Content (Blogs, Social Media, Etc.) and the old fashioned bush telegraph (chats at work, with family & friends, etc.). Then there is the bombardment via emails, sms, telemarketing, etc. How much of this is actual information ? How much, if any, contributes to your actual Knowledge ?
To make some sense out of all this let us first look at the wider Australian economy in general.
Some say we avoided a negative fallout of the 2008 GFC (Global Financial Crisis), and are in a better position compared to most of the developed western world ( US, Europe, etc.). Are we ?
Others say we overreacted to the 2008 GFC, spent hundreds of billions of dollars needlessly, and postponed (and increased) the problem to a few years down the track ….. Have we ?
What we do know is that a large part of our economic health depends on our trading & exports, mainly of commodities (mining & minerals, agriculture, etc.), and will be so, in the foreseeable future. Is this a fair observation ?
We have mostly been a net importer & borrower (we import more stuff then we export, and we borrow more money from overseas compared to our own savings), and will be in the foreseeable future. Do you agree ?
Our economy is closely related to the wider global economy. We are highly dependent on the world to keep buying more & more of our stuff, and at higher & higher prices. Do you agree ?
This brings us to the question – How is the global economy (buyers of our stuff) doing ?
There is tremendous amounts of Data shouting at you, from all over the world. We hear daily about weak economies in the US, Europe, and most other nations.
We hear about how some countries (Asian economies, Japan, China, India, etc.) will save the world by making up for weaker western countries. What are you hearing ?
We hear about slowing Chinese & Asian economies, and of soft & hard landings. What do you think ?
We hear about government policies – economic policies (Fiscal & Monetary), Tax policies, Social policies, Political & Geopolitical policies, etc., and how the collective wisdom of politicians & officials will solve our global problems. Will they ?
We hear about Banks & Financial institutions, Too big to fail, their impact on global economic health, and various stories on their health, practices, shenanigans, executive salaries, share prices, etc. What are your thoughts on this ?
Some say Europe in general & the EU (European Union) is being fixed. That the EU & the Euro (currency) was & is a good Idea. What do you think ?
That economies & banks in Greece, Portugal, Spain, Italy, etc. can be fixed, and all will be well if we all just had a bit more faith and sacrifice a bit more. What do you think ?
Others say the whole concept of the EU & Euro was wrong to start with, and not sustainable. That many of the economies & banks in Greece, Portugal, Spain, Italy and even France, & Germany (even the UK) have huge deep rooted and structural problems. What do you say ?
Some say the US economy is stabilising and will start to get better soon. What are you Hearing ?
Others say there are deep rooted problems within the US economy. That the USD (US Dollar) dominates & distorts world markets. That US borrowings & long term commitments (both private & government) are unsustainable in the long term. What is your opinion ?
Subject of the Month – “Is it the right time to buy property”
I was having a chat with a client few weeks ago and the question popped up ….. Not for the first time …. Have been hearing this question, one way or the other, for more than 25 years …..
I see three central figures in this question – and will look at each of them in detail
The subject (person/s thinking of buying property or any asset)
Who is buying the property (The entity – You alone, with your partner/wife, your company, trust, etc.) ?
Why are you buying it (To live in it, investment, business purpose, holiday home, etc.) ?
What is your current financial situation (Your job/work/business stability, current income/s, future income expectation, current financial commitments & future expectation, etc.) ?
What is your current asset position (Your assets – savings & liquid funds, property/ies & value, superannuation balance/s, other assets & value, etc; Your Liabilities – short term loans, credit & other card balances, property loans, other debts & commitments) ?
Based on all of the above, what is your capacity to borrow ? But more important than that – What are your comfort levels (I call it the “Sleep Well At Night” test) ?
The Property or asset
Where do you want to buy ? – Answering this will be easier if you have done your sums well on the above questions ……
What do you want to buy (You know your budget, you know your limitations on what area/s you can afford to buy. This will help you narrow down on what is practical & affordable. It will now be a matter of individual choice – Location, access to amenities, type, style, etc.) ?
The third party – The market (within which the buying & selling is happening)
We have covered the questions of “Who”, “Why”, “Where” and “What” so far. You should be wondering – We have not yet come to the question we started with – “WHEN” is the right time ????
Patience my friends …… The whole point of this article is to suggest that there is no such thing as “A”, or “The” “Right” “Time” to buy …….
The “Property Market” (or any asset market for that matter) is a broad & highly general term, and it is difficult to form an opinion on timing your purchase based on this broad & vague term.
The property market consists of various geographical locations (Countries, States, Cities, Towns, Villages, Suburbs, etc.), various types (Residential, commercial, Rural, Industrial, etc.), various styles (Land, Freestanding, Units, Townhouses/villas, coastal properties, architecture, etc.).
Then there is the impact of the global economy (and sentiment / expectation of future health), Local economy (Australia), Government policies (capital gains, taxation, incentives, etc.) etc.
Then there is the perception, opinion, wishes, hopes, expectation, etc. – Of millions of people – Both property owners and people wanting to enter the market, which will impact on supply & demand.
Then there is the concept of ‘Price” and “Value” – This is a matter of interesting discussion by itself – for another day.
Conclusion – I think it is a matter of priorities. It would be ideal to first make sure you have satisfactory answers to the “Who”, “Why”, “Where” and “What”.
Once, and If, you have done your homework correctly, the “WHEN” is a bit more easier to decide upon.
Let me throw open the discussion to you. I look forward to your opinion, counter argument, response, constructive criticism, feedback, etc.
Looking forward to hearing from you …………