by Financial Foundations on 06/11/2019

Steering Through Choppy Seas

STEERING THROUGH CHOPPY SEAS

Posted on November 6, 2019

This time around it’s not a debt crisis, although debt levels are extremely high, but geopolitical instability.

The ongoing US-China trade war and Brexit confusion in Europe have increased market uncertainty and volatility and put a spoke in the wheel of global growth. The International Monetary Fund (IMF) forecasts global economic growth to ease to 3.0 per cent over 2019. It expects Australia to grow at 1.7 per cent. ⁱ

Against this backdrop, there has even been speculation that the Reserve Bank may need to resort to ‘unconventional measures’ such as negative interest rates and quantitative easing to boost growth. These measures have been widely used overseas but are foreign concepts to most Australians. So what are they?

WHY NEGATIVE RATES?

Negative interest rates have been a feature of the global financial landscape since the GFC, in Japan and in Europe. European central banks charged banks to hold their deposits, encouraging them to lend out cash instead to kick start economic activity.

So far, the Reserve Bank hasn’t needed to wield the negative interest rate stick, but we are edging closer. The cash rate is at a record low of 0.75 per cent with further cuts expected.

The Reserve Bank has said it is unlikely to take rates below zero, especially now that the property market is showing signs of recovery and mortgage lending is on the rise. Taking interest rates too low could run the risk of igniting another property boom.

Policy interest rates

* Main refinancing rate until the introduction of 3-year LTROs in December 2011: deposit facility rate thereafter

Source: Central Banks

If negative rates are off the table, another way to bankroll economic growth is quantitative easing.

WHAT IS QUANTITATIVE EASING?

In the aftermath of the GFC, central banks in the US, Japan and Europe printed money to buy government bonds and other assets. By pumping cash into the system they hoped to boost economic activity.

There has been much debate about whether quantitative easing worked as intended. What it did do was reduce currency values and push investors into higher-risk assets such as shares and property in pursuit of better returns.

It has also increased global public and private debt to $200 trillion, or 225 per cent of global GDP. Until now, high debt levels have been supported by high asset prices. But when coupled with geopolitical and trade tensions, debt adds to the downward pressure on growth.ⁱⁱ

The slowdown in economic growth in Australia and elsewhere is reflected in falling bond rates.

BONDS SOUND A WARNING

In recent times more than 10 European governments have issued bonds with negative interest rates. At first it applied to short-term bonds, but Germany, the Netherlands and Switzerland have 30-year government bonds with negative yields. ⁱⁱⁱ

A Danish bank has even offered 10-year mortgages at minus 0.5 per cent. ⁱⁱⁱ

In recent months, yields on Australian government 3-year and 10-year bonds have dipped below 1 per cent, an indication that the market expects growth to slow over the next decade.

10-year Government Bond Yields

Source: Refinitiv

Falling bond yields have fuelled speculation that the government could issue bonds and use the proceeds to fund infrastructure spending or direct payments to households. This would effectively combine quantitative easing with more conventional government stimulus.^iv

WHAT DOES THIS MEAN FOR ME?

It seems more than likely that bank deposit rates will stay low, and probably go even lower, for some time. That means investors seeking yield will continue to look to property and shares with sustainable dividends.

While the hunt for yield should support asset prices, it may not be plain sailing.

Trade wars, Brexit, high asset prices and slowing economic growth are creating a great deal of uncertainty. Each new twist and turn in trade talks sends markets up in relief or down in disappointment.

After a decade of positive returns, and average annual returns of 7 per cent from their superannuation funds, investors may need to trim their expectations.

TIME TO PLAN AHEAD

If retirement is still a long way off, you can afford to ride out short-term market fluctuations. Even so, it’s important to make sure you are comfortable with the level of risk and investment mix in your portfolio.

If you are close to retirement or already there, you need to have enough cash or ready income to fund your pension needs without having to sell assets during a period of market weakness. For the balance of your portfolio, you need a mix of investments that will allow you to sleep at night but still provide growth for the decades ahead. When markets recover, you want to catch the upswing.

Successful investing requires patience but also adaptability. If you would like to discuss your overall portfolio in the light of market developments, give us a call.

i https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019
ii https://www.smh.com.au/politics/federal/200-trillion-in-global-debt-at-risk-if-trust-falters-oecd-20190909-p52pdr.html
iii https://www.ricewarner.com/can-super-funds-continue-to-meet-their-investment-targets/
iv https://www.ampcapital.com/content/dam/capital/04-articles/olivers-insights/2019/august/OI-280919.pdf

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Building Wealth In Diversity

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BUILDING WEALTH IN DIVERSITY

Posted on October 3, 2019

What a difference a year makes. In recent months, Australian shares hit a record high, the Aussie dollar dipped to levels not seen since the GFC and interest rates were cut to historic lows.

Towards the end of 2018, shares were in the doldrums and while experts agreed the Aussie dollar would go lower most tipped the next move in interest rates would be up.

All of which goes to show that when it comes to predicting financial markets, the only sure thing is uncertainty. There’s no avoiding market risk, but it does need to be managed if you want to build enough wealth to live comfortably in retirement and achieve other life goals along the way.

Thankfully, there is a way to reduce the impact of market volatility on your overall investment portfolio. Hint: it’s not by putting all your money in the bank.

MIX IT UP

The best way to reduce the risk of one bad investment or a downturn in one market decimating your returns is to hold a mix of investments. This is what is referred to as diversification or, as Grandma might say, not putting all your eggs in one basket.

To smooth your returns from year to year and avoid the risks of short-term market volatility, you need a mix of investments from different asset classes.

The difficulty of predicting the market in the short-term was certainly in evidence in the year to June 2019.

At the end of 2018 global sharemarkets were gripped by the fear of an escalating US-China trade war, confusion over the final Brexit deal, rising US interest rates and falling commodity prices. Investors who panicked back then and sold their shares would have missed out on the unexpected rebound in global shares.

A YEAR OF SURPRISES

As Table 1 shows, Australian shares returned 11 per cent in the year to June 30. Global shares returned 11.9 per cent while US shares returned 16.3 per cent, partly reflecting the fall in the Aussie dollar from US74c to US70c.

Table 1: Total returns (% p.a.) as at 30 June 2019

Source: Vanguard

Although not included in the table of returns from listed investments, the worst performing asset class in the year to 30 June was Australian residential property. According to CoreLogic, Australian home values fell 6.9 per cent over the year. But while the housing market downturn was constantly in the news, good news in other sectors of the property market went largely unnoticed.

The best performing asset class by far in the year to June was Australian listed property, up 19.3 per cent. ASX-listed real estate investment trusts (REITs) invest in a wide range of office, industrial and retail property.

The gap in performance between direct residential property and listed property highlight another important aspect of diversification. You also need to diversify within asset classes.

LOOK BEYOND YOUR BACKYARD

Where property is concerned, that means investing across a range of property types and geographic locations. By diversifying your property investments, you reduce the risk of short-term price fluctuations in one location which can result in a big loss if you are forced to sell at the bottom of the market.

The same holds true for shares. By investing in a range of companies, industry sectors and countries you reduce the risk of short-term losses.

Many Australians have a share portfolio dominated by the big banks and miners, attracted by their fully franked dividends in a low interest rate world. This is especially so for retirees and others who rely on income from their investments.

The danger is that investors with a portfolio heavily weighted towards local stocks are not only exposed to a downturn in the bank and resources sectors but also the opportunity cost of not being invested in some of the world’s most dynamic companies.

TIME IS YOUR FRIEND

Over the last 30 years the top performing asset class was US shares with an average annual return of 10.3 per cent. Australian shares (9.4 per cent) and listed property (9.2 per cent) were not far behind.

And then there was cash. In a time of record low interest rates cash in the bank returned 2 per cent in the year to June 30, barely ahead of inflation of 1.6 per cent. The return was better over 30 years (5.6 per cent), but still well behind the pack.

Cash in the bank provides interest but absolutely no capital growth. While it’s important to have enough cash on hand for daily living expenses and emergencies, it won’t build long-term wealth.

Table 2

*Growth of $10,000 with no acquisition costs or taxes and all income reinvested.
Source: Andex and Vanguard

As you can see from Table 2, someone who put $10,000 in the bank in 1989 and left it there earning interest would have the princely sum of $51,896 today. Whereas someone who invested the same amount in US shares would have almost $190,000.

There’s no telling what the best performing investments will be in the next 12 months, as past performance is not an indicator of future performance. What we can be confident about is that a portfolio containing a mix of investments across and within asset classes will stand the test of time.

If you would like to discuss your overall investment strategy, please give us a call.

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by Financial Foundations on 20/09/2019

Changing The Narrative To Achieve Success

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CHANGING THE NARRATIVE TO ACHIEVE SUCCESS

Posted on September 20, 2019

As children, we are surrounded by stories. The books our parents read to us, the cartoons we watch, the imaginary games we play. As adults we might like to think that story time is over. But it isn’t.

We are constantly surrounded by narratives in the media, amongst our peers and in our own heads. If these narratives are positive, they can propel us forward. But if they are negative, they can hold us back.

The sky’s the limit until we hit our self-imposed limitations, usually founded in feelings of fear and unworthiness.

So how do we break through these limitations and start reaching our goals. The answer is to change the narrative.

HOW WE LIMIT OURSELVES

To change any narrative, you need to have the right words. And in this case, that means identifying the obstacles you’ve set yourself and being able to communicate them. Identifying your fears is never easy or comfortable, but it helps to know that they usually fall into three main brackets.

FEAR OF FAILURE

This is the big one and it manifests differently in everyone. For some, it’s short-selling your abilities, for example not going for a new job because you fall slightly short on the listed criteria. Others might suffer from a stifling perfectionism, missing deadlines and opportunities because of an inner critic in overdrive.

This in turn can develop into what famed TED talker and vulnerability expert, Dr Brené Brown, calls ‘self-handicapping’. Say you’re preparing a proposal that requires a lot of research—instead of doing the work you avoid it. The internal logic goes that if you don’t try, you can blame any ensuing failure on lack of effort, which is easier to bear than lack of ability. The problem with this approach: you never get anything done, and your career trajectory will inevitably stall.

To combat this, start with that old adage, ‘nothing ventured, nothing gained’. For as novelist JK Rowling said in her now viral Harvard Commencement Address, ‘It is impossible to live without failing at something, unless you live so cautiously that you might as well not have lived at all – in which case, you fail by default.’ⁱ Getting comfortable with failure isn’t easy, but it is perhaps the only given on the pathway to success.

FEAR OF COMPARISON

No one likes to be negatively compared to others. But when we fear it intensely, envy can turn to jealousy, which doesn’t usually bear great outcomes. It doesn’t feel too good either.

Two-time Olympic Gold medallist, Abby Wambach, thinks we need to change our approach. She takes the soccer pitch as a metaphor. When you kick a goal, run towards your teammates. They set you up for the shot. Likewise, if your team mate scores, run towards them, and celebrate their victory. Success almost never exists in the vacuum; it is usually the cumulative result of a lifetime of learning and other people’s input.

FEAR OF CONFLICT

While Hollywood screenwriters love conflict, in the workplace and our personal lives we tend to avoid it at all costs. But avoidance isn’t necessarily helpful. It often leads to a reduction in productivity, and mounting unspoken tensions. Worse still, when the conflict does inevitably come to a head, it is more profound than if it had been dealt with early on.

One useful tool in these situations is what Dr Brown calls ‘the story I’m telling myself’. It’s a great way to frame conversations and avoid misconstruing your projections about the other with their reality. Rather than casting aspersions or laying blame, open the conversation with the sentence ‘the story I’m telling myself…’ It will allow the other interlocutor the space to hear you, and open the door to vulnerability, which is crucial to conflict resolution.

CHANGING THE NARRATIVE

We all have a tendency to limit ourselves when it comes to realising our dreams. But if you start to acknowledge the fears behind these limitations you can also start to unlearn them. Change the narrative you’re telling yourself about the life you deserve, and this might be story that ends happily ever after.

i https://news.harvard.edu/gazette/story/2008/06/text-of-j-k-rowling-speech/

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by Financial Foundations on 10/09/2019

How Super Is Your Life Insurance?

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HOW SUPER IS YOUR LIFE INSURANCE?

Posted on September 10, 2019

For most people, life insurance provides a safety net against unexpected events. This is particularly the case if you have a mortgage, debts or family who are dependent on you earning an income.

In many cases, life insurance has been automatically offered through superannuation. Although 85 per cent of people hold life insurance this way, a recent survey found one third of them don’t even realise.ⁱ

Now some super members may have lost their insurance cover and may not be aware of it.

MILLIONS COULD LOSE COVER

Concern that super balances were being eroded through insurance premiums and fees has led the government to introduce Protecting your Superannuation legislation.

As a result, from July 1 this year your insurance cover is to be cancelled, if your fund has been inactive for more than 16 months.ⁱⁱ

Letters were sent towards the end of the financial year to those with inactive funds, advising you to contact your fund to make a contribution or risk losing your life cover.If you didn’t respond, your life insurance policy may have been cancelled.

It’s estimated that up to 3 million super members may have been affected.ⁱⁱⁱ And while you can buy a new life insurance policy, you may not be able to reactivate your previous one unless your fund offered an extension of the deadline to reactivate cover. If not, you may have to face a medical examination and/or pay higher premiums in order to take out a new policy.

YOUNGER MEMBERS TO OPT-IN

It is also proposed (although not yet legislated) that new superannuation fund members who are aged under 25 will no longer be given automatic life insurance cover as they have in the past. Instead, they would be given the opportunity to opt in to cover.

The argument in favour of this move is that young people with no responsibilities, have nothing to insure. But once you buy a home, get married or become a parent, the need for life insurance becomes paramount.

As you get older, once the family has flown the nest and you have paid off all your debts, the need for life insurance may reduce. However, with a blended family, a life insurance policy in super can prove a good financial strategy to ensure the right beneficiaries receive your money. That’s because superannuation ‘death benefits’ don’t form part of your Will but are paid out separately to your nominated beneficiaries.

SMSFS MAY ALSO BE CAUGHT OUT

Up until now, some self-managed super fund members have deliberately kept a public offer super fund active to take advantage of the cheaper insurance. But as stated above, if that public offer fund is inactive and an election to maintain cover has not been made, then cover may be lost.

The beauty of having life insurance in super is that the premiums are generally cheaper because you are charged at a group rate. In addition, it won’t affect your cashflow as premiums come out of your super. Of course, that is the point of this legislation. The monies available for investment to build your balance for retirement may be eroded through those very premiums.

Another precautionary note is that it may be harder to access a payout through super if you need to make a claim. If you haven’t correctly nominated a beneficiary in your super, then it is the trustees who decide who receives the payout. And because the insurer makes the payment via the fund, this can also take longer.^iv

WHAT HAPPENS NEXT?

As part of the Protecting your Super changes, inactive funds with balances less than $6000 will see the monies transferred to the Australian Taxation Office. The ATO will then endeavour to amalgamate this money with an active superannuation fund of yours or hold the money for you until it is claimed.

If this happens, investment returns on the money held by the ATO may be significantly less than if you invested through your super.^v

Don’t wait until you need to make a claim to discover you don’t have any insurance cover after all. If you have any questions about the changes or your insurance needs in general, give us a call.

i https://www.superannuation.asn.au/media/media-releases/2019/joint-media-release-10-june-2019
ii https://firststatesuper.com.au/member/super/manage-super/protect-your-super
iii https://www.superannuation.asn.au/media/media-releases/2019/joint-media-release-10-june-2019
iv https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/insurance-through-super
v https://www.ato.gov.au/Individuals/Super/Growing-your-super/Keeping-track-of-your-super/ATO-held-super/

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by Financial Foundations on 03/09/2019

Spring 2019

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SPRING 2019

Posted on September 3, 2019

It’s September and spring is in the air. It’s time to shake off the winter cobwebs, get out into the garden or the great outdoors. It’s also a good time to plan your summer break.

August was a challenging month for investors. Global markets reacted negatively to an escalation in the US-China trade war and the looming no-deal Brexit. US economic growth slowed to an annual rate of 2 per cent in the June quarter, down from 3.1 per cent the previous quarter. China’s economy is also slowing – industrial production, retail sales and fixed asset investment all recorded lower growth in the year to July.

To stimulate the US economy, the US Federal Reserve cut rates by 25 basis points, the first cut since 2008. US short-term bond yields rose as did the US dollar, but shares fell around the globe. In the US, shares were down around 2 per cent for the month while Australian shares shed 3 per cent. The Hong Kong market fell more than 7 per cent as protests continued and UK shares fell 5 per cent on Brexit worries.

In Australia, most companies reported positive earnings for the 2019 financial year, but only a little over half managed to lift profits. One challenge is retail spending, up 0.2 per cent in the year to June, the weakest in 28 years. The NAB business confidence index rose in July, but the business conditions index fell to 2.4 points (the long-term average is 5.8 points).

On the bright side, Australia’s trade surplus hit a new record high of $49.9 billion in the year to June. The Australian dollar finished the month lower at around US67c, which should support our exporters.

PENSIONS TO RISE AS DEEMING RATES FALL

It’s been a long time coming, but up to 630,000 retirees could soon enjoy a small but welcome increase in their Age Pension payments following a cut in deeming rates used for the pension income test.ⁱ

Under the Age Pension income test, you are ‘deemed’ to earn a certain rate of interest on your savings and investments no matter how much income you actually receive.

The federal government announced in July that it will cut the lower deeming rate from 1.75 per cent to 1 per cent for financial investments worth up to $51,800 for single pensioners and $86,200 for pensioner couples where at least one person receives a pension. The upper deeming rate for savings above these thresholds will be cut from 3.25 per cent to 3 per cent.ⁱⁱ

As a result, Treasurer Josh Frydenberg said single pensioners could be better off by up to $804 a year and couples by up to just over $1,000.

Eligible pensioners will begin to receive the benefits from 20 September 2019 when pensions are next adjusted, but any extra payments will be backdated to July 1.

HOW DOES DEEMING WORK?

The deeming rules apply to income from financial assets such as superannuation (where the individual has reached age pension age), shares, savings accounts, term deposits and other fixed interest investments.

Different deeming rates apply if you are single or live with a partner.

To be eligible for the full Age or Veteran’s Affairs Pension under the income test, a single person can earn up to $174 a fortnight ($4,524 a year) before losing some of their pension. Couples can earn up to a combined $308 a fortnight ($8,008 a year).

For every $1 you earn over the threshold you lose 50c in pension income.

Once your financial assets reach a certain threshold, your pension eligibility will be determined by the assets test rather than the income test. Single homeowners can have assets of up to $263,250 before their pension is reduced ($473,750 for non-homeowners). Home-owning couples can have $394,500 combined ($605,000 for non-homeowners).

WHO IS MOST AFFECTED?

Because of the complex interplay between the Age Pension income and assets tests, your relationship status and whether you own your home, the people most affected by deeming rates are part-pensioners.

With official interest rates at a record low of 1 per cent, Age Pensioners who depend on income from cash investments face a double whammy. Not only do they receive less income from their bank deposits as interest rates fall, but they also risk losing some pension because they are deemed to earn more than they do.

Until the recent cut to deeming rates was announced, they had not moved since 2015. Since then, the Reserve Bank has cut the official cash rate five times, most recently in July, to a new historic low of 1 per cent with further cuts expected.

But there are also winners from the current level of deeming rates.

WINNERS AND LOSERS

Single pensioners with less than $51,800 in term deposits, and pensioner couples with less than $86,200, are probably earning a better rate of interest than the lower deeming rate of 1 per cent.

Even better off are retirees with money invested in Australian shares (either owned directly or within managed funds or superannuation) where yields have been over 4 per cent.ⁱⁱⁱ This is significantly higher than the top deeming rate of 3 per cent.

Growth investments such as shares not only provide the opportunity to grow your capital over the long term, they pay regular income in the form of dividends along the way. It’s understandable that retirees are risk averse and want to protect their capital. Bank term deposits provide the certainty of capital protection with a reliable income stream. But there is also an argument for diversifying your sources of income once you have covered your needs for ready cash.

If you would like to discuss your investment strategy in the light of changes to deeming rates and your Age Pension entitlements, give us a call.

i Treasurer Josh Frydenberg speaking on ABC TV, 14 July 2019, https://www.abc.net.au/news/2019-07-14/federal-government-announces-600-million-pension-boost/11307454
ii Dept of Human Services, https://www.humanservices.gov.au/individuals/news/changes-deeming-rates
iii ASX Market Index, All Ords average dividend yield, https://www.marketindex.com.au/statistics. CoreLogic, gross rental yields in year to June 2019 were 4.1%, https://www.corelogic.com.au/sites/default/files/2019-07/CoreLogic%20home%20value%20index%20JULY%202019%20FINAL.pdf

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by Financial Foundations on 02/08/2019

Is The Tide Turning On The Property Market?

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IS THE TIDE TURNING ON THE PROPERTY MARKET?

Posted on August 2, 2019

For the first time in years, the planets seem to be aligning for homebuyers and property investors. Interest rates are falling, property prices largely appear to be stabilising and constraints on bank mortgage lending have been relaxed.

It’s welcome news for first homebuyers and anyone who has been waiting on the sidelines for a signal that the downturn in house prices could be at or near the bottom in key markets such as Melbourne and Sydney.

As is always the case though with the national housing market, the full story is more than a tale of two cities.

HOUSE PRICE SLIDE LOSING MOMENTUM

According to research group CoreLogic, in the year to July the national housing market fell 6.4 per cent. This fall was driven by the two biggest markets Sydney (down 9.0 per cent) and Melbourne (down 8.2 per cent).

Perth, still coming down from the peak of the mining boom, and Darwin suffered similar declines. Brisbane fell 2.4 per cent and Adelaide was down 0.8 per cent from a much lower peak. Hobart (up 2.8 per cent) and Canberra (up 1.1 per cent) were the only capital cities to rise in the year to July.

But in the aftermath of the May federal election and the first of the Reserve Bank’s two recent interest rate cuts, the downhill slide in prices began to lose momentum.

In July, home values recorded zero growth nationally, with signs the housing conditions are stabilising. Most tellingly, prices rose slightly for the second month in a row in both Sydney (up 0.2 per cent) and Melbourne (up 0.2 per cent). However the stabilisation in housing values is becoming more broadly based with Brisbane, Hobart and Darwin also recording rises in values.ⁱ

HOME VALUE INDEX AS AT JULY 31, 2019

Source: CoreLogic

A jump in auction clearance rates adds weight to the theory that the market is on the turn. In the first week of July the clearance rate jumped to 69 per cent across all capital cities, up from 53 per cent the previous year. Sydney had the highest clearance rate (78 per cent) while Perth had the lowest (25 per cent).ⁱⁱ

RESERVE BANK OPENS THE BIDDING

In hindsight, the Reserve Bank’s recent decision to cut interest rates for the first time since 2016 could mark the beginning of the end of the downturn in home prices.

In June, the Reserve Bank lowered the cash rate from 1.5 per cent to a new historic low 1.25 per cent and followed up in July with another cut to 1 per cent.

Mortgage interest rates are also low by historic standards although not all banks passed on the full reduction in the cash rate.

In early July, the average standard variable mortgage rates of the big four banks were all around 4.9 per cent. The best available rates from smaller lenders are now below 3 per cent.ⁱⁱⁱ

BANKING REGULATOR JOINS IN

The Australian Prudential Regulatory Authority (APRA) is also doing its bit to breathe new life into the property market.

In July, the banking regulator scrapped a rule that required banks to assess new mortgage customers on their ability to manage repayments with 7.25 per cent interest rates no matter what their actual rate might be. This rule was introduced in 2014 to improve lending standards, but since then mortgage rates have tumbled.

Instead, APRA will now require banks to test if borrowers can manage repayments at least 2.5 percentage points above a loan’s current rate. With many mortgage rates for new customers currently around 3.5 per cent, this would mean banks would have to test whether customers could afford repayments of 6 per cent instead of 7.25 per cent.^iv

As a result, comparison website RateCity estimates someone earning the average wage ($83,455) could see their borrowing power increase by $66,000 to $544,000. ^v

PROPERTY INVESTING BEYOND HOUSES

Australians’ love affair with bricks and mortar is legendary, but there is more than one way to profit from property.

If you’re thinking of buying as an investment, rather than as a place to call home, there may be opportunities to invest directly in commercial property or via a managed fund.

Listed property trusts, property ETFs (exchange traded funds) and traditional unlisted managed funds offer a way to invest in a diversified portfolio of properties in Australia and overseas. As well as residential property they can invest in retail, office and industrial property.

Unlike the housing market, recent returns from listed property have been strong. In the year to June 30, the ASX300 A-REIT (Australian Real Estate Investment Trusts) Index posted a total return of 19.4 per cent. Total returns include capital gains and income from rents distributed to shareholders. Over five years the average annual total return was 13.8 per cent.^vi

That’s no guarantee of future returns, but it demonstrates the benefits of diversification. By comparison, the total return from Australian residential property was -3.3 per cent.^vii

If you would like to discuss your property investment strategy in light of recent developments, give us a call.

i All house price data from Core Logic, 1 August 2019, https://www.corelogic.com.au/sites/default/files/2019-08/CoreLogic%20home%20value%20index%20AUGUST%20FINAL.pdf
ii CoreLogic, 8 July 2019, https://www.corelogic.com.au/news/first-week-july-sees-combined-capital-city-clearance-rate-above-60-cent-4th-consecutive-week
iii The Sun Herald, 7 July 2019, https://www.smh.com.au/money/borrowing/how-to-get-the-most-out-of-lower-mortgage-rates-20190704-p5245f.html
iv APRA, 5 July 2019, https://www.apra.gov.au/media-centre/media-releases/apra-finalises-amendments-guidance-residential-mortgage-lending
v RateCity, 5 July 2019, https://www.ratecity.com.au/home-loans/mortgage-news/apra-changes-average-aussie-family-can-now-borrow-60k
vi Vanguard,https://www.vanguardinvestments.com.au/retail/ret/investments/product.html#/fundDetail/etf/portId=8206/assetCode=equity/?overview
vii Core Logic, 1 July 2019, https://www.corelogic.com.au/sites/default/files/2019-07/CoreLogic%20home%20value%20index%20JULY%202019%20FINAL.pdf