Investment Property Buying Tips
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So your looking to buy an investment property and want to make sure you are buying a property that will not only give you a strong rental return but also capital growth.
Well if you do not follow some key steps you stand to miss out on experiencing strong capital growth over time and having your property continually rented in all property markets.
So what are the key elements you need to be aware of;
Employment - Your property needs to be well located near major employers and have growing employment in the nearby region.
Population Growth - The demand of people to live in your suburb or region needs to be growing, if people want to live in your area and their are not enough houses them you have excessive demand. This is very good from an investment perspective.
Infrastructure - Local infrastructure is important as it will drive growth to your location, if new roads, schools, hospitals/medical services and social amenities are available then people want to be close. Also having express roads, well known schools are major drivers of property growth.
Transport - This is very important as it complements the profile of the location. If the location is well serviced by trains, buses and good roads then this will drive demand to the destination you are looking to invest.
Size of Land - This is what really drives property growth over time. The building that you life in essentially loses value, it does not appreciate thus it is the land that increases. If you have a large block in an old established location then this may be seen as a development opportunity and will generate exceptional capital growth over time. Always consider the size of the block relative to local developmnent requirements.
Proximity to City - This is perhaps the biggest investment property axiom. Location, location, location! If your near the city then this has all the services listed above as with the increasing demand to be close to where everything is happening this is a major consideration for investors.
NAB cut fixed home loan rates
NAB announced plans to cut their one year fixed interest home loan by 1% to 5.59%. The change takes effect on 1 December 2008.
The cut lowers the one year fixed introductory rate to 4.99% and the two year fixed home loan rate that also had a 1% cut to 5.59%.
The interest rate reduction from National Australia Banks comes ahead of the expected 1% cut from the Reserve Bank of Australia next week.
China slash interest rates
In response to a slowing economy the People’s Bank of China have taken the dramatic step of cutting their interest rate by 108 basis points in an attempt to stimulate demand within the economy.
The rate cut is the biggest by the Chinese since 1997 when the People’s Bank of China cut rates by 144 basis points.
The rate cut has reduced the one year yuan lending rate to 5.58%.
The rate cuts in China are likely to be followed by the Reserve Bank of Australia next week as they attempt to stimulate domestic demand within Australia.
Commonwealth Bank error affects 200,000 customers
The Commonwealth Bank went into damage control yesterday after an error affected up toi 200,000 bank customers across Australia.
The banking error erased funds from bank accounts for customers who performed transactions between Saturday and Monday.
Steve Batten a Commonwealth Bank spokesman said the error occurred because transactions were being duplicated due to a batching issue.
Commonwealth Bank customers would not be charged interest or fees as a result of any error that may have caused the account to be overdrawn or other fees to be inadvertantly generated.
Banks to pass on deposit guarantee
ANZ and the Commonwealth Bank have announced they will pass on the costs related to the federal government deposit guarantee.
NAB & Westpac have yet to announce their plans which comes into effect from midnight 27 November 2008.
The Government has three scales for the deposit insurance, 70 basis points for AA-rated lenders, 100 basis points for those rated A and 150 basis points for BBB-rated and unrated organisations.
Institutions such as the Bank of Queensland will absorb as much of the cost as possible whereas other’s like the Macquarie Bank have advised they will absord the total cost of the guarantee.
Both the ANZ and Commonwealth Bank as AA rated lenders will pass on the full 70 basis point charge to customers, the ANZ will introduce this as an opi-in or opt-out for customers who have more than $1 million in a cash account.
For customers with less than $1 million the federal government will cover the cost of the guarantee.
Rates forecast to hit near 50 years low in April 2009
Latest forecasts are expecting the Reserve Bank cash rate to hit 2.75% by Easter 2009 as the global slowdown continues to bite the economy.
Debt futures markets are forecasting a cash rate of 2.75%, a decrease of 2.5% from current Reserve Bank levels.
THe last time the cash rate was this low was 1960 when the cash rate hit 2.9%. Debt markets have also upped the expectation of a rate cut to 1.25% in December.
The expected falling interest rates are on the minds of major central bankers around the world as the global economies have or are falling into recession. The powerhouse German economy and Europe announced they were in recession last week and are hot on the heels of the faltering UK and US economies.
Suncorp Metway raise profit guidance in banking division
Suncorp Metway have surprised the market by upgrading their profit guidance in their banking business after revealing higher revenue and a focus on costs.
Suncorp however revealed a retreat from large corporate lending and syndicated loans while revealing a cut to loan growth rates. Suncorp announced an expectation of the banking profit to rise in the double digits before tax and bad debts.
The previous outlook was for single digit growth and is a sign of hope among the gloom affecting other major Australian banks.
Suncorp revealed Impairment losses are expected to be in the 35 to 40 basis point range of total loans, advances and other receivables for the full year. This compares favourably with it’s rivals.
Despite the somewhat more upbeat announcement by Suncorp Metway on their banking division the general trend of the economy is likely to put further pressure on the banks in coming months.
Best Australian Deposit Rates
Here at Australian Bank Watch we have spent some time looking for some of the best Australian deposit rates available whether they be at call savings accounts, cash managements account or online savings accounts.
It would be of little surprise that none of the major Australian banks failed to feature in the top handful but expect the major banks to show an increased effort to attract savers.
The major banks have so far concentrated on term deposits but the Commonwealth Bank have recently been advertising their Cash Management account where they offer 5.75%, remember this is above the RBA rate of 5.25%.
However, a number of other well known institutions are offering better deals.
AMP is the best with an eASYCash Management account that is offering 7.35%, the Bank of Queensland also offer an excellent rate with their WebSavings account that has an introductory rate of 7.20%.
The ANZ backed One Direct offer a high interest saver account that offers a solid 7% return while the superannuation backed Members Equity have a Online Savings account offering 6.50%.
They are followed by other major institutions such as St George’s Direct Saver with 6.50%, Adelaide Banks Cash Management Trust with 6.35%, Bankwest with a Telenet Saver account offering 6.25% on a promotional rate and Macquarie Bank with their Cash Trust offering 6.25%.
At a time when the world sharemarkets are in major upheaval perhaps now could be a good time to re-allocate what available cash you have into one of these high interest accounts.
United States & British Inflation plummets
In latest reports from Britain and the US, inflation has plummeted in both economies amid worsening economic conditions that have dragged thw world economy into an impending global recession.
In the US inflation fell at the fastest rate in 61 years in October as consumers have stopped spending and retailers attempt valiantly to maintain demand. Consumer prices dropped by 1% as fuel prices alone dropped by 14.2% in October.
In Britain, the annual inflation rate in October fell to 4.5% from 5.2% in September, the first fall in 14 months. The fall is the biggest monthly fall in 16 years as the global economy falters.
The news from the US and Britain confirm the respective central banks views that inflation would fall and locks in bigger than expected rate cuts on the way.
Babcock on borrowed time
Babcock & Brown is on borrowed time as they cling onto hope that they will survive the current economic decline that has seen Babcock lost 99% of it’s value in the last 12 months.
Babcock and Brown revealed this morning it was in danger of breaching the debt covenants in place and is looking to re-negotiate the debt terms to survive.
Babcock declared plans to sell assets and sack 50% of it’s workforce to keep the company viable. Even these plans seem unlikely to save the company that was heralded as the next Macquarie Bank only one year ago.
Babcock is certainly trading on borrowed time and is likely to go into a trading halt and is likely to disappear totally from the bourse.
The company are heavily debt laden and has $2.8 billion in senior bank debt and another $300 million in debt. The total of $3.1 billion is spread evenly over the major banks and any failure for Babcock to come to terms with the banks will leave the majors with further bad debts on their books.