Linz’s Musings – The Cash Crash and Growth wave coming…

G’day all

Almost the end of February already and 2021 does not seem to be slowing down at all!  With some minor spikes and hotspots of Corona, still raising its ugly head, just to remind us it is still there, but all in all, here in Australia and New Zealand, we have done very well in suppressing the virus

Other countries certainly have not been as lucky, but I guess when you actually do have a ‘MOAT’ and can raise the drawbridge as such, it certainly makes it easier.

In the meantime, market sentiment is already starting to go through the roof!  I have been saying for some time now that we are on the verge of a MASSIVE wave of growth in assets, particularly real estate, and we are already seeing this happen.

NZ is around 3 months ahead of AU, and even the U.S is now starting to rise quickly.

To say that we have been busy in an understatement…

One of the reasons for the massive boost in investments, particularly property is what is called the “Cash Crash”.

In essence, what we are seeing right now, with many government administrations pouring Billions, if not Trillions of dollars into their economies right now (whether or not this is needed is a debate for another blog…) is this will reduce the value of the ‘dollar’ so to speak.

So, investors try and ensure that they do not lose wealth, are looking to put their cash, into assets that do not depreciate in value.

We are already seeing this in the value of commodities, stocks, shares, even crypto and, yes, definitely Real Estate.

By investing in these assets, investors hope to preserve the value of their investment, and ride the wave of growth, or at least preserve the value they have.

Even here in Australia, I wrote about this a couple of weeks ago, the RBA surprised the market by doubling the amount of money it intended to print and pour into our economy by another $100 bn…

I could only see this was in an attempt to lower the AUD rate, but here we are, almost 2 weeks later, and bang, AUD has almost hit 0.80c US

Does this mean they will pump even more into our, already simmering economy?  Who knows, but what I can say is hold onto your hats…because this is going to get crazy!

You got this!

Happy Investing all and have a great weekend!!

 

 

 

 

F*** 2020, Here’s How to Get 2021 Back on Track…

You probably had big plans to make 2020 your best year yet. You had the drive to chase new goals and reach greater heights in your personal life and career.

But as we all know, the year took a bizarre and unexpected turn towards the worst within a few months of us all yelling “happy new year”. 

In what was one of the longest and most frustrating years yet, 2020 put many dreams on hold. And though we’ve made it through to a new year, everyone is still trying to find their way back into some sense of normality.

COVID struck hard leaving many people and societies at a standstill while watching their economies crash and unemployment numbers spike to the highest level in many years. 

To make the situation even worse, people were fed (and believed) divisive conspiracy theories that only fuelled society’s anxiety.  


But as Winston Churchill famously had said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” 

With that mindset, there are good reasons to be optimistic in 2021.

While we can’t undo the changes forced upon, we can look to the future with hope and make 2021 the most prosperous year yet.  

 

What’s your 2021 New Year’s Resolution?

How often have you proclaimed, “New year, new me” as the clock strikes midnight on the last day of the year? Likewise, how long did it take to break your resolution or fall back into bad habits? 

It’s no wonder these resolutions fail, saying ‘I’ll get fit” or “I’ll give up drinking alcohol” sounds great but it’s not really practical if it doesn’t have a plan of action.  

But if anything is to be learned out of 2020, it’s that there’s one resolution that should be introduced and kept – securing your financial future.   

At a time when the world’s economy is down, and the bounce back is expected to take years, it’s the perfect moment to shift your focus to pursuing financial stability. 

And one massive opportunity to achieve it is by investing in the $33 trillion dollars US residential property market

COVID left the housing inventory all over the world in short supply, and this caused prices to rise. But it had seemingly almost no effect on demand. Many homebuyers were set on moving out of the city and into the suburbs. While others were scaling back and seeking to buy cost-efficient homes. And this made the competition tougher than ever, because people needed to act fast. 

Experts say that this will continue in 2021. Investment analysts foresee that the US residential property market demand will only continue to rise because of several factors like lower mortgage interest and a trend among many to relocate away from the city to suburban areas

For example, home values in Detroit increased by more than 92% over the last five years. And in the next 12 months, they’re projected to grow by another 12.2%. Demand continues to rise, because people are now evaluating the places they’ve been living in and assessing it against the future they actually want. 

 

Why your New Year’s Resolution should be investing in the US residential property market 

If you want to safeguard your future financially, consider investing in the US residential property market. After all, it’s never too late to add another resolution to your list for 2021. 

Here are several reasons why: 

1. Low interest rates

Banks worldwide are maintaining low interest rates as a way to help the economy recover post-COVID. The US Federal Reserve stressed interest rates near zero will continue until at least 2023

When interest rates are low, spending is encouraged. Borrowing becomes cheaper, thus making large purchases on credit — such as the purchase of a home — more affordable

The average rate for a 30-year fixed mortgage dropped from 3.62% in January 2020 to 2.68% in December 2020. There has been a consistent 0.7%-0.8% drop each month, and it’s expected to continue in 2021.

Now that mortgage interest rates are set to stay low for the next few years, property investors have more time to prepare for their purchase.

They can carefully weigh up their options and wait for more homes to go on sale. Given that the housing market is competitive and demand is high, it will only be a matter of time. 

Until then, buyers can work on securing their mortgage requirements and pre-approval applications. So, when they finally find a property they want, they can get ahead of their competitors. 

2. Introduction of stimulus package

In March 2020, the U.S. government signed the CARES Act, a $2 trillion USD COVID-relief act given in the form of stimulus checks. Individuals and businesses eligible for tax rebates received these checks.

The stimulus act was designed to help in two ways: 

  • The money provides financial assistance to low-income persons and families to help keep up with their bills.
  • It was given knowing people would spend it immediately, in turn avoiding any stagnancy in the economy.

The initial package included $1,200 USD per adult and $500 USD per child for households whose income was less than $99,000 for single taxpayers and $198,000 for couples.

Moreover, a new bill known as the Consolidated Appropriations Act of 2021, or CARES Act 2, was passed on December 21, 2020. This paved the way for another $600 USD given to qualified individuals and their dependents. 

While this doesn’t directly affect the real estate market, it does have some influence on it. Because a significant percentage of taxes has been waived, people have money to spend. Those who are wise enough are putting that money into purchasing properties. For foreign investors, this shows why now is the right time to capitalise on the U.S housing market, as higher spending will allow it to recover faster, and property value will then increase. 

3. A new wave of growth is emerging 

The global real estate market is headed for immense growth in 2021. 

Australia’s excellent response to COVID-19 has brought back the momentum for the housing market. In 2020, Sydney saw the biggest increase in house prices (12%), followed by Melbourne (10.8), and Hobart (7%). First-time home buyers are coming back, and it’s also attracting foreign investment. 

New Zealand also has a new wave of growth emerging. Rising housing prices in the country are a result of demand outweighing supply and relatively low interest rates which is forecast to sustain until the end of the year. Average prices for a house in New Zealand is now $788,967, an increase of 2.6% in just a few months despite a 6.1% growth in 2020’s final quarter.  

But while the market is hot in Australia and New Zealand, costs are still incredibly high with limited options. The turnover also takes longer, which incurs higher expenses for foreign buyers. 

In the US, home sales increased by 10.5% in August 2020 from the previous year. First-time homebuyers accounted for 33% of total sales. 

During this period, 69% of homes were on the market for less than a month. Properties typically stay on the market for more than a month, but in 2020, the average turnover was only 22 days.

This faster turnover rate means owners are selling quickly and there are numerous buyers available. Anyone who is ready to buy can enjoy their new investment home sooner.

 

Fortune favours the brave: it’s an opportunity to take now

All this indicates that investing in property is a great strategy to achieve financial stability. But succeeding in this endeavour requires learning and, like a New Year’s Resolution, the focus to see it through. That’s what  Star Dynamic client, Katie Potter did. 

When she decided to invest, she didn’t reap the benefits overnight. Instead, she broke her property investment dream into actionable steps and remained committed until she achieved her ultimate goal – two investment properties within nine months.

Like Katie, you have the opportunity to safeguard your future and enjoy passive income. We’ve created a free e-book to help get started on everything you need to know about investing in the US residential property market. 

If you’re interested to know more and want to speak with us, contact us today

 

Linz’s Blog – 5 Reasons Why a ‘Perfect Storm’ is Brewing in the US Residential Property Market

We have finally come to the end of 2020 – a memorable beginning of a new decade… just not in the ways we anticipated.

People can’t seem to decide whether the year has gone too slowly or too quickly. Many seem to have lost their sense of time, but can we really blame them?

Because of the COVID-19 outbreak, millions of people have lost their jobs, and the restrictions put in place have caused a massive change in our lifestyles.

So for a majority of workers, progress for both personal and career plans had since been put on hold.

It was not long ago that we were told that the current global recession will be the deepest since World War II, and with how fast the downturn happened, we had no reason to doubt that. 

Understandably, many still fear taking great leaps to build their wealth. Making big career and financial choices involves a level of risk, which perceivably look much higher given the circumstances we’re in today.

Potential investors are backing out of their plans and waiting for the global economy to return to its previous peak. However, forecasts say that this won’t happen until late 2022.

But wait, don’t go yet! There’s good news.

The situation is different in US real estate. The market has been doing a lot better than expected, and it’s forecast to bounce back at the beginning of 2021 and be even more positive as we enter 2022.

With the US residential market booming, economic indicators are showing that there has never been a better time to invest in US property.

So if you were waiting for an opportunity amidst the economic slump, now’s your chance.

5 reasons why investors should capitalise on the US property market  

Many will tell you that you can’t do much to propel yourself to success given the pandemic and its effects, but the data speaks for itself.

US property investors should be confident heading into 2021, and here’s why:

1. Despite economic conditions, the US residential market is booming

It’s an unfortunate fact that many industries have been suffering since the start of the global lockdown.

Hundreds of thousands of businesses had to temporarily shut down and it will take many more months (or even years) for most of them to recover from this recession.

In the face of tough economic times, opportunities may be limited, but it’s counterproductive to assume that they don’t exist at all.

Because these opportunities ought to be taken, especially if they’re as big as what the US residential market presents.

Despite the economic downturn, real estate in the US is booming. And no, we’re not exaggerating at all. 

Prices for houses across the US demonstrated the fifth-largest gain in nearly 25 years, and is the strongest in 15 years, which is greatly advantageous to sellers.

A September report showed that US home prices rose by 7.8% in the past year, which is the fastest climb in over a decade. Furthermore, the typical U.S. home appreciated by 1% in October alone, to USD $262,604, which was the best monthly gain since 2005. 

Economist Jeff Tucker says that the market is seeing some of the fastest price appreciation in the modern era. “I don’t think this pace of appreciation can go on forever. It’s just too hot,” Tucker says.

By November, the total active listings were down 39% for the fourth consecutive week, keeping the prices up.

And this ‘head of steam’ is being seen in the New Year now as well.

This is a massive opportunity for investors for Australia and New Zealand, considering how our property prices are becoming way too expensive for people to even step into the market.

 

2. Record-low interest rates

An interest rate is the percentage of the amount of money loaned which is charged by the lender for the use of its money.

The bank applies this interest rate to the total unpaid portion of your loan, which you should pay in each compounding period. Otherwise, your outstanding debt will increase despite making payments.

In a nutshell, the lower the interest rates are, the better. 

And right now, US interest rates are at a record low, incentivising buyers to find homes faster, keeping the demand high, and therefore keeping the prices high too.

As someone looking to invest, this means that you don’t have to worry much about paying high interest rates. And as a property seller, this means that there will be more people looking to buy homes (i.e. more potential buyers of your property).

According to the Federal Reserve, this near-zero interest rate will remain until the economy starts to recover from the virus, giving investors all the more reasons to act now.

 

3. Best exchange rate for the Australian and New Zealand dollar compared to the US dollar in more than two years 

The low interest rates, the booming real estate market, and the significantly lower prices of property in the US compared to Australia and New Zealand – you’d think these are all the perks you need to invest, but it turns out, there’s more.

Due to the recession, the exchange rate between the three countries is now very strong. The value of the US dollar has plunged in 2020, and according to forecasts, there will be a bigger decline in the coming year.

This means that you can exchange and spend less of your Australian/New Zealand dollars to buy in the US, which saves you a lot of money, especially for huge purchases like property.

 

4.Stimulus packages in the US and Australia 

According to Investopedia, a stimulus package is “a coordinated effort to increase government spending—and lower taxes and interest rates—in order to stimulate an economy out of a recession or depression.”

The government does this by boosting employment, consumer spending, and investment.

Currently, the Australian government is using AUD $17.6 billion to support up to 6.5 million individuals to keep their jobs and 3.5 million businesses to keep running during the pandemic-triggered recession.

Meanwhile, the US government has approved a new proposal of stimulus packages for their economy as well that numbers in the Trillions of dollars…

 

5. COVID vaccines being rolled out 

Scientists have been working tirelessly on a vaccine since the start of the pandemic which fortunately led to a success.

The Pfizer/BioNtech vaccine is reported to be 95% effective, and 43,000 people have had the vaccine with no safety concerns. Australia is expected to roll out vaccines by March 2021, while the US has started to rollout vaccinations.

This means that we are getting closer and closer to returning our world to as close to normal as we can get.

Having these vaccinations rolled out will boost the confidence of Australians and Americans alike, reducing the fear and stress brought about by the pandemic.

For the US residential market, this means that more people will start buying property again, so you need to be ready to sell by then.

The world’s circumstances have given all of us a reason to fear taking risks and making big decisions. But this doesn’t mean that we should do nothing and simply let time pass us by.

Despite the pandemic and the recession it has led to, there are still many growth opportunities out there – we just need to look in the right places.

The US property market has barely been affected by the COVID-19 situation. In fact, the market is booming and things are looking more positive in the next few years. 

So when the ‘fog of war’ lifts, there will be an abundance of opportunities investors can capitalise on. 

Will you be ready to take advantage of them? 

 

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