Today the Reserve Bank of Australia (RBA) has increased the official cash rate by 0.25%pa.

The official cash rate remains at 4.00% p.a.
(this is the wholesale rate before bank margins)

For an article published by The Age this afternoon please click here

It was a Friday evening and hordes of investors streamed into the function room at level 44 in The Sail@Marina Bay. Thanks for Forex Asia Academy, we were able to hold this event at the tallest residential tower in Singapore.

My business partner, Steve was present to answer questions that were posted when participants of the forum registered online. The response was indeed encouraging and from the feedback that we got from the audience, there’s still a very strong level of interest amongst Singaporeans as far as Australian property investment is concerned.

One of the all-time favourite questions that was poised to Steve, who has a huge portfolio of residential properties in Australia was if the time is right now for property acquisition. Steve’s answer was pretty simple and straightforward. ‘It all depends on your property plan’, he says. As circumstances for different individuals differ, the time for property acquisition for one may not be for the other.

If you wish to find out more about property plans, you may contact me at +65 98344408.

Have a great working week ahead!

With the Reserve Bank of Australia cutting rates, the official Cash Rate in Australia is just 3.25%. The mortgage rates have dropped to just a little over 5% for investors who are on standard variable rates.

Investors are looking to lock in their rates once the official Cash Rate drops below 3%. I see a perfect opportunity to acquire residential properties in Australia with positive cashflow at least for the next 5 years, provided you have loans that are disbursed between now and 2010. The rental yield for residential properties is about 5% and with mortgage rates falling below 5% or even 4%, rental income will be more than the outgoings, thus increasing your cashflow. Besides with the AUDSGD at below 1.0000, there hasn’t been a much better time to acquire residential properties in Australia.There’s a small window of opportunity. However there are risks involved. Here are some of the reasons why you SHOULD NOT look into acquiring properties NOW:
1.    You don’t have instant equity now.
The best approach now is get into House/Land that can be built between 6-9 months. Loans will be disbursed at the time when Cash Rate is low; hence fixing your interest rate for the next 5 years means positive cashflow for you.

2.    You are highly suspicious that prices of properties in Australia will drop. House/Land packages are basic housing required in Australia. If you acquire a House/Land in the region of $320,000-$350,000, that’s pretty close to replacement cost. The risk of prices sliding further is minimal.

3.    You are worried if banks will ask you for ‘margin calls’ if property prices dip.
Singaporeans can relate to prices of properties dropping 20% and banks asking owners to ‘top up’. In Australia, banks don’t practice that. As long as you keep up with your interest repayments, banks don’t do margin calls for property investors.

According the Australian Bureau of Statistics, Melbourne is growing at a rate of 1000 people per week and developers are just not building enough houses to accommodation the growing population. The recent bushfire in regional Victoria further deepen the need to increase the supply of accommodation for residents in Victoria.  In the current credit environment, financing for big projects can be a challenge for developers and we have already seen developments stall because of lack of financing.

House/Land packages may be a good option for investors to get into the market quickly. Like Warren Buffet says, ‘Be fearful when others are greedy and be greedy when others are fearful’. I see more upside rewards than downside risks in the current market.

The Reserve Bank of Australia lops rate by 100 basis points to bring the cash rate down to 3.25%; the lowest rate since 1960. So now depending on how much the banks react, this will give us market leading rates of around 5.00%pa.

This means that for every $100,000 borrowed, principal and interest repayments (30yrs @ 5.00%pa) will now represent about $536.00 per month (interest only will be $416.00 per month)

”There was a significant deterioration in world economic conditions late in 2008,” said RBA Governor Glenn Stevens in a statement accompanying the cut. ”The effects on household and business confidence of the financial turmoil following Lehman’s collapse, and continuing strains on major financial institutions, saw a significant downturn in demand around the world.”

All the major lenders, National Australia Bank, Commonwealth Bank and Westpac said they will be reviewing their rates.

The rate reduction comes hours after the Federal Government announced a $42 billion stimulus plan aimed at keeping the economy out of a recession. The spending includes some $12.7 billion in cash payments and $28 billion on new infrastructure projects including roads and schools.

Some industry experts are expecting another 50 basis point cut when the RBA meets in March; while some reckoned they will be a pause in March followed by another round of cuts in April to bring the cash rate down to 2.75%.

Today’s RBA’s rate cut follows the Federal Government’s revision of growth forecasts for the economy. The Rudd Government expects Australia’s growth to slow to 1% this fiscal year to 0.75% next year - one of the few economies to continue to expand.

For property investors who are seeking to lock in low rates, the time will be right for them in the coming months as RBA continues to cut rate and major banks passing the savings to investors. There is a small window of opportunity for investors to fix their rates, i.e. before the economy recovers and RBA putting up rate again.

Fact Finding for Property Buyers

There was an interesting article in a free circulation yesterday. The person who wrote in urged the government and related bodies to implement a fact-finding process for potential homebuyers in Singapore. Property acquisition is a financial decision and it should start with finance.

In my opinion, there are two groups of buyers in Singapore; owner-occupiers and ’speculators’. I have come across very few buyers who are thinking of holding long-term with Singapore properties. Buying is the easy part; holding is a test of your perseverance and your vision of reaching your long-term goals. And because there is no capital gains tax in Singapore hence speculators are encouraged in this market.

And perhaps many dismiss the idea of holding property long term in Singapore; the idea of fact-finding becomes irrelevant. The speculators would want to dispose their assets as quickly as possible to the next buyer. However, having said that, owner-occupiers generally do their sums before they take the leap.

My investors are all long-term Australian property investors. I don’t entertain short-term speculators and hence it is paramount that I conduct proper fact-finding for my clients. As a trained engineer, I have been doing that for a long time and without sounding too arrogant, I am happy to say most of clients are pleased with what I have done for them…

 Another round of rate cut by 100 basis points brought relief to home owners, property developers and investors. In a widely anticipated move by the Reserve Bank of Australia, it announced a rate cut of a full percentage point, bringing interest rate down to 4.25%. It’s the third consecutive rate cut since October 2008.

Banks are expected to pass on the benefits of the rate cuts to consumers and business owners. If banks pass on the savings to consumers, there would be a $250 per month savings in interest cost on a $300,000 loan.

For property investors on a standard variable rate, more rate cuts are expected come Feb 2009 (RBA does not meet in Jan) and increased rental, you can be assured of an improved cashflow from your property portfolio.

For full article report, click HERE.

Over the weekend, there are at least 7-8 property firms advertising for property launches in Singapore. Well, you can’t blame these property firms for thinking there’s a good opportunity here in Singapore. After all, the positives are still there as far as Singaporeans are concerned. Most are hurt in the stock market, and history showed that whenever ‘doom and gloom’ sentiments are prevalent, there are still opportunistic investors who are armed and ready to take advantage of present conditions to enter the market. However, if I am seeking to invest in Australia, I will be ‘dramatically confused’ if I want to base my decision to invest based on projects advertised.

After putting all conditions in place, I have a near-to-perfect plan for anyone wanting to start acquiring properties now. In PPG (PPG International & PPG Asia), we used the Wealth Builder System to determine the ‘BC’ of a client before recommending the next course of action. Nobody else does that in the market. If you are a serious investor, you must get to know this. The easiest way is to EMAIL me to get in touch with me. Be prepared to leave your contact details as well.

Assuming your BC is determined, you can now go ’shopping’.

I see the following happening:

1. Interest rate will fall to at 4% or 3.5% by the first half of 2009.

2. The rise in interest rate later on will signal the reversal of the economy.

I quote Warren Buffet’s saying, ‘Be fearful when others are greedy and be greedy when others are fearful’. No doubts about it, people are fearful about investing now. The most sinful thing is to do NOTHING, because that means your wealth has got no opportunity to grow. Of course, if you have not much wealth, it is quite understandable that you do nothing right now. Otherwise, you may be over-analyzing and you may be ‘beaten’ by the market before you do anything.

Every advertisement says the AUD has dropped 30% against the SGD and it’s on par with SGD now. If you have buy something now, it’s cheaper. Technically it’s true. Even the AUD depreciates against the SGD further, in my personal opinion, the AUD will still appreciate against SGD in the long run. The indicators are simple: Oil price cannot remain at this level, interest rate cannot keep dropping, and commodity prices cannot remain stagnant. Once the world’s biggest consumerism recovers, demand comes back again, the economy will recover. However, I am not bold enough to predict when.

If you buy something that settles next year (2009) to take advantage of low interest rates in AUD, your holding costs will be significantly reduced, cashflow improved dramatically. Remember the biggest risks pertaining to property is HOLDING COSTS! It’s not the value of the property! If you manage holding costs well, you will be able to grow your property portfolio systematically.

Once the interest rate starts rising, this is where you can convert to a fixed rate. With a fixed interest rate, you are assured of virtually the same holding costs/cashflow in your property. And to put the icing on the cake, if you have another property that is financed in another currency e.g. SGD, you can now hedge your risk. There are just so many permutations to build up your property portfolio. I guess it’s due to my engineering background. I love manipulating the permutations to help my investors build their portfolio. It’s problem solving to the highest level…

If you need any independent advice, do EMAIL me immediately.

Home owners have plenty to cheer about when the Reserve Bank of Australia annouced an interest rate cut of 75 basis points bringing the cash rate to 5.25%.  In a widely anticipated move, the RBA went beyond expectations of a 50 basis points cut and lowered the burden of mortgage repayments by home owners by going on another bold move to cut interest rate by 75 basis points following a full 100 basis points cut last month.

It’s expected to cut rate again in December to stimulate the economy in the light of a global financial crisis. For further news, click on this link: http://www.theaustralian.news.com.au/story/0,25197,24602026-12377,00.html

Lately, some Aussie property investors asked me if it is advisable to take out a loan in SGD since the AUDSGD has plunged to below 1.0000 on several occasions. It remains to be seen if the AUD will rebound in the short term. Analysts from major banks and even bloomberg has given some indications and as far as I am concerned, I feel there is still pretty much a lot of uncertainty in the market.

To make an objective statement; if you are savvy with how financing in an alternative currency works and you are confident of keeping a close watch on the market and you have strategies to know when you should switch, then go for it. If you are a professional who is busy with daily work routines and meetings, the last thing you want is for the banks to call you for a margin call.

Banks in Australia has taken some initiative to safeguard their position given the volatility of the market. e.g. some banks have lowered their LVR to 65% in the light of the AUDSGD fluctuations. This is strictly for residential properties only.

If I am first time investor, I would settle my property with 75% LVR in AUD. With an expected rate cut in Nov by another 50 basis points, interest rate is coming down. There is very little risks since AUD has taken a dive and with a weakening global economy and weak commodity price, it is quite prudent to take up an AUD loan. Once the dust settles, I would switch at an appropriate time. I cannot be more conservative….

I have written an ebook to help some of investors to tide through this period with some strategies. It’s the first version and at the time of writing this blog post, I am already preparing for second version of the ebook. If you wish to know more about the opportunities and risks involved in multi-currency loans, do drop me an email with your name.

I will advise the steps accordingly so that you can download the ebook.

The Aussie dollar gave me a big heart attack today. The AUD nose dived against SGD by at least 1000 basis points from yesterday. My phone was flooded with calls from investors who are on SGD loan. They were all concerned about banks asking for ‘top-ups’.

My advice is first calm yourself down. If you have some spare cash, buy some AUD. If you are asked for top-up, take it as a sum of money tucked away for fixed deposit (interest rate is still pretty good). Given the financial turmoil, lots of ‘technical analysis’ went beyond logical explanation. Supports and resistance may no longer be effective indicators right now. Brace yourself and see the ‘opportunities’ availabe instead of focusing on what went wrong.

It will take a while before the market ‘decides its direction’. I would have posted the 1hr AUD/SGD candle if I have access to it. You will see the the ‘dramatic dive’. In any case, property is a long term investment, so to all Aussie property investors - don’t panic and stay cool…I’ll be buying more AUD if the rate stablizes tomorrow.