I continue to be fascinated with people who have achieved success in their lives, reasoning that there are always lessons to learn and inspiration to glean from studying their lives. One such person I have followed with great interest is Mr Frank Lowy.
Ever since the very first publication of the Australian Rich 200 list in 1983, Frank Lowy has appeared among its members. In recent years his net wealth is estimated as in excess of $8 Billion AUD, which is enough to place him 3rd on the list of wealthiest Australians of 2016, behind Harry Triguboff and the Pratt Family.
Most investors are aware that housing markets across most parts of the country (Perth & Darwin excepted) have been in a prolonged state of price increases. The more aware will have drilled down to what has been driving the boom and will know that in answer to the demand, developers have been building apartments in record numbers, for record prices.
What is currently causing jitters is that no one seems to know if the number of apartments that have been constructed, are under construction or approved to be constructed, will ultimately prove to be too many for the demand. If so, many fear that could lead to a downward price spiral and a protracted period of flat growth in prices.
Let’s have a look at the situation from a macro viewpoint and see if we can make sense of it.
Last week in my Radio Wealth Episode 14 podcast, I shared with you some really exciting information about a home loan product that had an interest rate potentially as low as 2%.
Yes, TWO percent.
Needless to say it has caused quite a stir and there are lots of investors out there who have been emailing in asking questions.
One in all in I say, so I am going to reproduce a few of the best questions, and the answers here so that you can get a better feel for what the product is.
Just over 20 years ago, in 1995, an “average” Australian home could be bought for about 3.8 times the average weekly earnings.
Today, that same ratio is 6.5 times average weekly earnings. So on the face of it, Australian homes today are almost twice the relative prices as they were 20 years ago – see the chart below.
Welcome to the Radio Wealth Real Estate Financing Special broadcast.
If you have ever wanted to know what it takes to pay off your own home and then your investment property loans fast, then this show is an absolute must for you.
We have a special guest joining me in the studio, my friend Scott Parry, who is a finance and wealth creation specialist. Scott told me a few weeks ago about a new financing facility called Rate Reducer. I think that it is the most powerful system for paying off a home loan that I have ever seen for investors who have their own home and at least one investment property.
The Rate Reducer loan facility may be able to help you get a home loan that has an interest rate as low as 2%. Yes, that’s two percent.
So this twenty minute episode could be just the thing for you if you are looking to accelerate your wealth creation plan.
We are looking to create more special Radio Wealth shows with special guests – if you know someone we should be talking to, who has something valuable to share, do please let us know.
Or if you have your own questions, do send them in. Remember you can ask anything you like – this is your show. The questions can be about anything to do with life, freedom, property investing, finance, planning, goal-setting, inspiration – whatever you want to know that will help you along on your journey.
Feel free to email email@example.com with any questions you want answered on the show.
Have you ever wondered what motivates an athlete to devote countless hours of practice, training, pain and sacrifice, often physical as well as financial, to have the opportunity to compete in their chosen sport at the highest level? And what drives them to win?
In 1990, at the Commonwealth Games, Australian Andrew Lloyd found himself running against the current Olympic champion in the 5000m. With a lap to go he was in third place about 50m behind the race leader. At the final straight he somehow found a sprint to go past the 2nd placed American and then was about 15m behind the tiring John Ngugi from Kenya. Lloyd was just about done but victory was close. Something clicked inside Lloyd and instinct took over. He was famously quoted to have been thinking – “bugger the silver, go for gold.” Which he managed to do, defeating the Kenyan by a whisker.
If you are anything like me, you might have approached the current Rio Olympics with a bit of a “take it or leave it” attitude. But as the games have progressed I found myself increasingly drawn in to the excitement of the various competitions and the incredible stories of the athletes and teams.
I’m sure you have been following the economic news and now know that last week the Reserve Bank of Australia lowered official interest rates to a record low of 1.5%. Of course that’s not the rate at which you can borrow, which will be 2-4% higher (the banks margin) or the rate at which the bank will pay you for your savings – currently anywhere from 0% to about 3%, depending on the length of time you loan your money to the bank and how much you loan. Yes, your deposit to the bank is a loan from you to them – your deposit is actually a liability on the bank’s balance sheets and that is because it is your money and at some point you might want it back.
Let’s assume that you are either already an investor or you want to be one, having the lowest interest rates on record is a major benefit. That is simply because the cost of borrowing money is lower than it has ever been. The Government and the Reserve Bank have decided it would be a good thing if you were encouraged to borrow a bit more and then spend that money on whatever it is you want, since that has an economic multiplier as you consume goods. Yes, it is good for our economy if you are spending.
If you are a real estate investor, I am reasonably certain of two things. One, you are doing it to make money. And two, you are doing it because you want to create the best quality of life you can have in the shortest possible timespace.
To do that, you need to follow the money. And that can happen on several levels.
Most people who invest in property, buy their first piece of real estate in their home city. And to follow that, the small percentage of investors who go on to purchase multiple properties, usually also buy in their own backyard. Then they perhaps will renovate or otherwise improve the properties and settle down to wait for capital gain to add to their wealth over time. That is usually a pretty good way to build wealth over a ten to twenty year investment period. The challenge with that passive strategy is that your home city may not be the best place in the country in which to be investing at any given time. Ideally you want to be investing in to a location that is entering its upswing in the cycle, bringing immediate capital growth, which can give you an enormous advantage in building up your capital more quickly than waiting for the cycle to come to your home city.
At 7.6 million sqkm, Australia is the sixth largest nation on Earth, behind Russia (17M sqkm) and the USA, China, Canada & Brazil (all about 9M sqkm). We are about 300% the size of India with just 2% of India’s population. As a better comparison in terms of first world economies, the USA has about 20% more land mass that Australia, but 300 million more people live in that country.
I couldn’t really reconcile that – (modern) Australia and the USA were “formed” in to nations at around the same time period, with American Independence and the colonization of Australia both occurring around the late 1700’s. With about 240 years of national development, there is a wide gap in where our two nations are in terms of population. The only thing I could think of was that Australia had more arid and dry terrain in its central regions than the USA. But I don’t think that could be the whole reason.
It seems everyone has a point of view on the property market these days. And it is great that so many individuals, companies (semi-government, government & private), financiers and industry bodies can put out so much information, facts, stats, figures and opinions on the current and future state of our real estate market.
The challenge is much of it is contradictory, inflammatory and in some cases inherently biased.
Being bombarded by all sorts of conflicting information can make it very challenging for investors to sort through what is relevant and then reach a conclusion. I have found that if you have an opinion, you will by default search for and then find information that tends to back up that viewpoint.