June 14, 2021

#105: Is the market at the top of the cycle, should you invest today, where are interest rates headed and should you fix, what should a firs

47 minutes

https://propertyplanning.com.au/propertyplannerbuyerprofessor/ Market insights 1. Regulation on the horizon as the property market continues to surge New data shows that property buyers are stretching towards their maximum borrowing capacity to compete in this hot market. Investors have been quiet in this market so far, but they are making a come-back, as first home buyer numbers start to taper. As we expect annualised growth to hit 15% for some of our capitals and regions in the coming months, the jungle drums will beat louder for regulator intervention to slow down the velocity of the growth. 2. Australia's AAA credit rating Australia is now one of only 9 economies to have a pristine AAA balance sheet recognised by all three of the world's largest credit rating agencies. This is great news for us, as it keeps our interest rates slightly lower, which we do enjoy as a capital importing nation. The AAA rating means that our interest rates are 0.15% lower than they otherwise would have been. Listener questions answered 1. The market seems to be at the top of its cycle. Is it a good time to invest in property or should we be waiting for the demand to subside or the chance that govt regulators will step in to curb prices? Whilst prices are undeniably on the rise, the trio firmly believe that we are certainly not yet at the top of the market. Any regulation introduced will be carefully planned so as not to de-stablise the market or cause a downturn, but simply to slow the acceleration of property price growth. The focus for regulators is optimising GDP and bringing unemployment down. The government will be loathe to introduce any measures that could hamper our economic recovery, particularly before the election. 2. What are the implications of waiting it out? If you would like to purchase property and are waiting for demand to subside or property prices to stop rising, it's likely that the market will move further away from you. There is great fear in purchasing at the top of a market cycle, however this only poses an issue if you crystalise losses by selling or if you have purchased a poor-quality asset in the first place. If your strategy is to purchase and hold for the long term, you will most likely be able to ride through any downturns. 3. Is now a good time to refinance? If so, why? The trio discuss the current conditions for refinance, which are fantastic. Property prices have gone up, so it's likely that property owners have more equity that can be tapped into and interest rates are the lowest they've ever been. This environment provides great opportunity to get on to a sharper rate and release some equity to protect and/or build your wealth. 4. What's your opinion on where interest rates will go over the next 12-18 months? Should I be fixing some of my debt now while fixed rates are low? The trio discuss the outlook for variable rates, which are linked to the RBA cash rate, while fixed rates which are connected to bond yields. Fixed rates are expected to rise, and even since recording, one major bank has increased their fixed rates by 0.25% and 0.45% for two of their fixed rate terms. This is likely to be the trend in the coming months as the $200B term funding facility that the Government has provided to banks is coming to an end in June. For reasons relating to our economic recovery, the variable rate is expected to remain nailed to the floor for some time to come, as consistently communicated by the RBA. 5. Considerations for fixing some of your debt The Property Planner explains why it's almost always a good idea to have some...

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