Duane Turner - Watakere & Surrounding Areas : Squirrel Mortgage and Property News

With New Year (and all that eating and drinking) behind us, it's time to pen some thoughts for the year ahead. It is similar to an article I wrote in February 2014. Not much has changed.

This month we take a look at the global economy. We also look closer to home at what might happen to house prices and interest rates over 2015. There's lots of 'good news' in our media so you'd be forgiven for being a wild optimist. That's fine, but don't get too caught up in the hype. We are susceptible to global events and yet we seem largely oblivious to what is going on.

Cheers,

BIG ECONOMIC TRENDS YOU NEED TO BE AWARE OF

We are going through uncertain times that nobody convincingly understands. In the media we are dished up the usual succession of short-term views on the currency, growth, and interest rates, and at the moment it seems mostly good news. We're an optimistic bunch. None of which capture the big structural issues lurking ominously in the background. For a start, we face an ageing population, huge levels of debt, geopolitical instability, and no real wage growth in developed countries for over 20 years. This has the potential to bite and bite hard, I'm just not sure when.

IS 2015 SET FOR A MARKET CORRECTION?

At some point we will see a market correction. It's a natural part of a capitalist system. No amount of political meddling can prevent it, eventually. The timing is hard to predict because politicians (and those reliant on maintaining the status quo) will kick the can down the road for as long as they are able. However, a market correction (aka crisis) is inevitable. Could we see it in 2015 and if so, are you ready?

WILL HOUSE PRICES INCREASE IN 2015?

In the Auckland region we have a shortage of properties for sale, high immigration, and money coming in from China. All of these factors along with low interest rates and increased rating valuations will fuel further house price appreciation through the first half of 2015, particularly in the central isthmus. As we said back in October, expect to see more property related headlines in the Herald about record house prices in Auckland.

MORTGAGES RATE FORECAST FOR 2015

The good news is mortgage rates will stay low this year. The driver will be weak commodity prices killing-off any potential for inflation. The fall in dairy prices alone will reduce our income by $7 billion this year. Meanwhile over the ditch a 50% drop in Iron Ore prices has wiped $16 billion from their income. Oil prices (and commodity prices generally) are dropping so there is no inflation to speak of.

Eventually when interest rates do increase, it wont be by much. Our view is that lower than normal rates are here to stay and we've been consistently saying that for a while now.

TIME TO SET SOME FINANCIAL GOALS?

Have you ignored money for too long? Do you have a plan, or are you just living day-to-day hoping that house prices will increase? Does your job suck? Could 2015 be the year to set some goals around getting financial fitter? We don't have the answers, but we do believe that having a plan and putting it into action is a great start.

PROPERTY INVESTOR - THE DOWNSIDE OF LEVERAGE

A few clients have rediscovered recently that it isn't always easy to release equity when selling property.

I've written about this a number of times, but it really needs to be emphasized again and again. Leverage combined with lack of cash flow is the biggest risk for investors and it materializes quickly.

When an owner sells a property the bank can review your overall financial situation and can unilaterally decide to take the full sales proceeds.

Whenever you buy a property you can feel like the odds are stacked against you. At Squirrel our impartial advice, influence and insider knowledge even out those odds.

We'll help you sort out the deals from the duds, get you the inside word and go into bat for you with the banks (not with an actual bat, although we've come close).

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