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Ben Kingsley Blog post by Ben Kingsley

2009 Review & Outlook for 2010….

Before we look at the prospects for 2010, let’s review the 2009 property year, as it was a wonderful year for ‘us’ property investors and for those of you who are new to our newsletter and my comment each month I just want to highlight some of the comments I made in previous newsletters to re-enforce the message regarding property as a wealth creation vehicle.

Nov 08 – I believe one thing to be true, if you have the ability to afford a property today for the next 10 years, then buying good quality direct residential property now, will be very good to you tomorrow, whether you’re buying to live or invest.  As two constants forever ring true about residential property – land as a limited resource and property is a means of accommodation.  This knowledge has made sense for at least the past thousand years or more, so it should make sense for at least a couple more…

 

Feb 09 – For those that can sensibly afford to invest wisely during 2009, will in my belief, look back on this year of uncertainty with a positive view.  Furthermore this should also reconfirm to themselves that buying during a ‘value’ period such as 2009 with a long term investment outlook will have made a huge difference to their overall wealth when they look back in 5 to 10 years from now.  The trick is to get in before the greater population also thinks times have turned back for the better, because history tells us they will!

As for residential property, well those who have read my previous newsletter comments will know my theory I call the “Power of One” (Dec 08 issue), which in this context technically means, you have a real shot in 2009 to secure a well priced investment property in a superior location.  Think about it – record low vacancy levels and about 4% + rental yields, a huge undersupply of available housing, as per ANZ report, record low interest rates, and possible tax benefits for your investment all point to a positive long term result. 

Yes there are always risks, yes there will continue to be negative commentary, yes there will be knockers and doomsayers saying don’t – Those that cut through the “noise” and do their research and educate themselves will, in my opinion enjoy the fruits of their efforts in future time to come, as they had the courage to stay true to a sensible and well planned strategy.

I know one thing, 2009 will be a year that I certainly add to our portfolio of properties, with my usual detailed and methodical approach and I will enjoy looking back in years to come to see the result!

 

Jane and I did add to our property portfolio, buying a property in March 09 – A property that the agent is now telling me is now worth over $250,000 more than we paid of it, in just over 9 months. Our other property also performed well, adding a further $200,000 it our wealth position.  So 2009 was a wonderful wealth building year for us, personally.

In general data terms, based on median house prices, Melbourne’s market moved from a median of $385,000 at the start of 2009 to $450,000 at the end of November 09, an increase in dollar terms of $65,000 or in time value terms that equates to $1,250 dollars per week.  Now isn’t that a nice little passive income each week! – (Source: RPdata)

So what’s ahead for 2010?  Well market sentiment is now much higher for property and most property research houses are still predicting further positive growth for 2010.  I too believe prices will continue to rise in 2010, but I must warn investors, that asset (Property) selection is far more important in this market, as I believe if we continue to see growth in values across each entire city, then a ‘bubble’ in these locations will form and may see property values in the outer suburbs decline.  Interest rates will also play a major role in continued value increases.  If we get to 7.5% as the average retail interest rate being paid by the mortgage belt, then values will flatten and most likely fall in the mortgage belts of each city.  Blue chip areas may be affected, but they are unlikely to see the same impact as those who will struggle to meet their repayments, as the affordability measure of property hits home.

That’s my view, but I thought I’d add a recent article written by John Edwards, who is a respected property research analyst and the founder of Residex, a very highly respected property research house.  Here’s his review of the past decade and a small snapshot of property moving forward: click here

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