With the financial turmoil, Europe's debts and current credit squeeze, you need to hope for the best, but prepare for the worst!
Remeber the adage - buy in gloom and sell in boom!
To weather the potential storm or take advantage of potential opportunities, you need money or available money.
If you have equity in your property, consider of taking a line of credit. Cash is king. Loans will become harder, and what you are able to get now, you may not be able to get later.
Is it the right time to lock in interest rates over the next 3 - 5 years? I am going to!.
Interest rates may get cheaper. The risk, in my view, isn't the interest rate, but the ability to get cash due to a potential credit squeeze!
Those with lines of Credit or available funds will have a competitive edge!
Click here for Michael Luca's commentary on the RBA's interest rate decision.
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3 comments:
Hi Ivan,
Analysis presented is very valuable. I am aware of what is happening in Euro related economies; I was not able to assess the impact haere in Australia. There will be a cash crunch.
Thank you
Prasanna
Hi Ivan,
If the banks are unable to provide loans to people during this year due to the credit squeze that has happen abroad then it is going to put a lot of families in financial pressure. I have recently visited the state of miami in the US a few days ago and I have found that people the crises people brought properties and upon the GFC they have lost a lot of equity and value and as a result they are effectively paying an excessive mortgage to the banks.
I am hoping that this does not happen in Australia because Sydney properties at the moment is over-valued and very expensive and if I crash does happen a lot of families will loose significant wealthy .
I have come across to the slogan that "cash is king" and am contemplating whether it is worth while to sell your property before this property crash comes to the australian property market. In addition 2012 has not been a good start to our local economy, not only we experienced factories and steel companies closing their businesses however a lot of white collar positions are going offshore because its expensive to hire Australian workers and not only that, the cost of living is so expensive and it makes economic sense for large corporations to close their doors in Australia and move to cheap labour competitive countries such as China and India just to maintain and enhance their profitability margins.
I do not want to accumulate a lot of debt but I am working on ways to safeguard my current wealth position and at the same time accumulate saving opportunities to prosper and adapt to this current environmental condition of global uncertainty. If you can provide me with some insights it will be greatly appreciate it.
Kind regards
William
Hi William
Your commentary has a lot of merit, and your assumptions are entirely reasonable.
This is my view....
Australian property -In some areas properties will fall and in others it will rise. I am focussing on acquiring property in the inner west in Sydney for many reasons... I will prepare an email in the next few weeks together with my team.
If property does go down because of banks.... Rents won't go down, purely as a result of supply and demand. Occupancy in areas such as the inner west and inner city continue to be 97pc plus occupied, as it has for the past 25 years.
On current prices, I am getting a 5 to 6 pc yield, and if I gear to 70 pc on the new property, the property needs to increase 1 pc per annum for me to break even....
If the bank lends you money on a 25 year mortgage, it is unlikely they will call the loan in, as long as you continue to service it.
The issue is them providing more loans going forward.
Re the Aus economy.... USA and Europe are in the doldrums... Could it be worse? Possibly.... but the likelihood is that it will get better.
My view is that the more Aus separates it's destiny from Europe and USA, the better....there is massive growth in China and India, and Aus is well placed to take advantage of this growth. See articles from my blog on my views in this regard.
Re the stock market.... It had its height at 6600 and it's low at 3300... And has been trading at between 4000 and 5000 since 2008.
The question is whether it will get back and surpass 6600 in the next 5 to 10 years?
My view is that it will....
If that is the case, together with div yields of 5 to 10 pc, and a capital growth of 5 pc pa plus over the next 5-10 years.... An increase of 8 to 14 pc pa of your portfolio is not an unreasonable scenario.
In summary, it is my view, that as an investor, the next few years is going to present many opportunities, and those with available ammunition and a clear strategy will be able to take advantage of the gloom.
William, these are my views for what they are worth.
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