Once in a Lifetime
Wake up and smell the roses – and quick, because it’s happening at lightning speed.
Interest rates are dropping. Big time. There are 2nd tier lenders with 3 year fixed rates starting with a 2. The main 4 banks are still in low 3s but heading to around 2% very soon. The reserve bank says that interest rates could go to 0%.
And the market is going nuts.
Auction clearance rates in the main capital cities are up to 80%. Recently in Brisbane and Adelaide, suburbs recorded 100% clearance with prices 13% above reserve. The main capitals’ median house price rose more than 1% last month. Smart investors are doing the maths.
Let me break it down. 3 months ago a $1m loan would cost you $46,000 p.a. and banks would calculate your repayments at $72,500 p.a.
Today that same loan will cost you $29,000 p.a. and banks factor in roughly $50,000 p.a. payments. Now the reserve bank is saying we could go to 0% interest rates which will mean our borrowing rate could be 1.9%. Today a $1m loan can cost $600 per week and that could drop to $400 per week. A $500,000 property (the Custodian sweet spot) could cost just $300 per week! And it rents for more than $450 per week. Even crazier, if rates fall as predicted, a $500,000 loan could drop to $240 per week. That means $200 per week Cash flow positive before tax deductions – just by riding this rate drop phenomenon.
And yes, prices will skyrocket because of this. In fact, they are.
Experts are predicting a 10% house price increase in the next 12 months. I think it will be much higher, especially in markets that haven’t yet run. In fact I think it could be as high as 40% in the next 2-3 years. My maths is purely based on the 40% saving in interest costs.
In 2001 the median house price in Brisbane was $160,000. The numbers say that in the 7 years previous it had barely grown, whereas Sydney and Melbourne had just about doubled. Rates had dropped from double digits to mere single digits. From 2002 Brisbane doubled over the next 2.5 years and kept on going, long after Sydney and Melbourne had slowed.
The same thing is happening now, with a twist.
The twist is migration is more than double, and interest rates are less than half compared to back then. I will be doing a special webinar on fine tuning our strategy to best ride this wave, as this is a once in a lifetime opportunity we will have.
There’s an arbitrage we need to clearly see to enable us to increase our portfolio to maximise growth, whilst reducing costs and maintaining or improving our income. For those with multiple properties and multiple loans you must stay ahead of the curve here to reap the benefits. That means consolidating loans and locking in sometime in 2020, but to do that you need start planning NOW.
The Once in a lifetime webinar is in October.
Click here to register your interest and we will send you the dates as soon as they are confirmed.
