Most months I have trouble coming up with something half intelligent<\/p>\n\n\n\n
and hopefully entertaining to say in these bulletins. This month is<\/p>\n\n\n\n
different. World events, the activities of our politicians and the possible<\/p>\n\n\n\n
impacts here in the Land of Oz leave me with much to talk about, but<\/p>\n\n\n\n
where to start. Perhaps I should confine myself to the view I\u2019m enjoying<\/p>\n\n\n\n
from our holiday rental apartment at Coolangatta. The waves are<\/p>\n\n\n\n
breaking around Greenmount Point, there\u2019s a volleyball festival on the<\/p>\n\n\n\n
beach out front, and one of my favourite bands is playing this arvo at the<\/p>\n\n\n\n
legendary Coolangatta Hotel.<\/p>\n\n\n\n
<\/p>\n\n\n\n
The managing director and I have taken my mum to Cooly for a little<\/p>\n\n\n\n
holiday after my dad passed away late last year. Many happy memories<\/p>\n\n\n\n
of the southern end of the Goldy revisited and a cracking outlook from<\/p>\n\n\n\n
Reflections by the Sea. For our money the views are the best on the<\/p>\n\n\n\n
coast and while some of the units are getting a little tired you simply<\/p>\n\n\n\n
can\u2019t beat the location. Nice staff too.<\/p>\n\n\n\n
<\/p>\n\n\n\n
The views do contain one sad vista. The old Greenmount Resort is now<\/p>\n\n\n\n
a pile of rubble to be replaced by a new residential development. Prices<\/p>\n\n\n\n
start circa $4.8M so God knows what a penthouse will be worth! If the<\/p>\n\n\n\n
number of mega buck residential apartment projects either on the go or<\/p>\n\n\n\n
in planning are any indication, there is some serious money looking for<\/p>\n\n\n\n
a home on the Gold Coast and in Northern NSW. You\u2019d have to think<\/p>\n\n\n\n
that will put upward pressure on existing unit values and with that clever<\/p>\n\n\n\n
segue, it\u2019s crystal ball time.<\/p>\n\n\n\n
<\/p>\n\n\n\n
Let\u2019s say values of new off plan units continue to hit stratospheric<\/p>\n\n\n\n
numbers. It\u2019s true that these new projects provide a level of<\/p>\n\n\n\n
architectural elegance and amenity mostly unmatched by existing<\/p>\n\n\n\n
apartment buildings. But, as the old saying goes, a rising tide lifts all<\/p>\n\n\n\n
boats and it\u2019s hard to see unit values at, say Reflections, not rising as a<\/p>\n\n\n\n
result of the prices at Greenmount. Even if you\u2019ve got to do a full reno<\/p>\n\n\n\n
the value proposition is hard to argue against. Of course, such a trend<\/p>\n\n\n\n
might not be all good news for management rights operators with<\/p>\n\n\n\n
expensive managers apartments. The old unit to business value ratio<\/p>\n\n\n\n
challenge may mean that unit values giveth and business values taketh<\/p>\n\n\n\n
away. Will any of this happen? I have no idea.<\/p>\n\n\n\n
<\/p>\n\n\n\n
Let\u2019s say our rulers in Canberra decide to tinker with negative gearing<\/p>\n\n\n\n
and capital gains tax concessions. In fact, let\u2019s say they abolish both but<\/p>\n\n\n\n
grandfather existing arrangements. If you are already in the market, you<\/p>\n\n\n\n
are now a property investor with a tax arrangement that new investment<\/p>\n\n\n\n
buyers can\u2019t access. While you hold the asset, and when you decide to<\/p>\n\n\n\n
sell, you can take advantage of negative gearing and\/or capital gain<\/p>\n\n\n\n
concessions. The person you sell to cannot. Therein lies a strong<\/p>\n\n\n\n
motive to retain the property and take advantage of tax concessions<\/p>\n\n\n\n
both while you hold and when you sell.<\/p>\n\n\n\n
<\/p>\n\n\n\n
Maybe such a situation would stem letting pool losses to owner<\/p>\n\n\n\n
occupiers. Almost certainly new investor demand would slow. Would<\/p>\n\n\n\n
that result in falling prices for traditional investor stock? Will any of this<\/p>\n\n\n\n
happen? I have no idea.<\/p>\n\n\n\n
<\/p>\n\n\n\n
Let\u2019s say there is a war in the Middle East, and the net result is<\/p>\n\n\n\n
constricted world oil supply. Let\u2019s say that while our politicians say we<\/p>\n\n\n\n
have plenty of reserves we really don\u2019t. Petrol prices rise and so do the<\/p>\n\n\n\n
costs of every service and function in our economy that relies on oil.<\/p>\n\n\n\n
Think the grocery stores, delivery drivers, farmers, airlines, etc etc. All<\/p>\n\n\n\n
of this is of course inflationary, and we all know what that means. The<\/p>\n\n\n\n
blunt instrument of interest rate increases comes down upon 3.3 million<\/p>\n\n\n\n
owner occupiers, 2.2 million investors and 2 million businesses. But<\/p>\n\n\n\n
here\u2019s the thing. There is demand and supply side inflation, concepts<\/p>\n\n\n\n
that our treasurer is currently studying so he can differentiate. What I\u2019m<\/p>\n\n\n\n
talking about is supply side and no amount of tinkering with interest<\/p>\n\n\n\n
rates is going to stop me from buying toilet paper, no matter how<\/p>\n\n\n\n
expensive. Will the RBA apply some nuance at its next board meeting<\/p>\n\n\n\n
or bring out the hammer? I have no idea.<\/p>\n\n\n\n
<\/p>\n\n\n\n
Let\u2019s say all this has you thinking about interest rates. To quote<\/p>\n\n\n\n
Shakespeare, \u201cwhat light from yonder window breaks\u201d\u2026\u2026\u2026\u2026. ahh,<\/p>\n\n\n\n
wrong one. Let\u2019s try \u201cTo fix or not to fix, that is the question\u201d. On this we<\/p>\n\n\n\n
can be fairly clear. Fixing is for the fearful and variable is for the brave.<\/p>\n\n\n\n
Throwaway line but grounded in truth. If you borrowed a few bob 30<\/p>\n\n\n\n
years ago and stayed on variable the whole time you\u2019d be, on average,<\/p>\n\n\n\n
ahead of the fixed rate curve. That doesn\u2019t mean that through fortunate<\/p>\n\n\n\n
timing some fixed rate punters haven\u2019t done well, particularly if you fixed<\/p>\n\n\n\n
during a pandemic. Hope we never have one of those. If you sleep<\/p>\n\n\n\n
better knowing your loan payments are locked in go right ahead. For<\/p>\n\n\n\n
the rest of us variable is the go. Of course, there are numerous interest<\/p>\n\n\n\n
rate management options the banks will try and flog you. Hedging,<\/p>\n\n\n\n
caps, collars and split facilities, to name a few. My advice is to take the<\/p>\n\n\n\n
advice of Alan Bond, legendary businessman, borrower, fraudster and<\/p>\n\n\n\n
sailor. If you owe the bank $1M you got a problem, if you owe them<\/p>\n\n\n\n
$100M, they got a problem. Will fixing work for you? I have no idea.<\/p>\n\n\n\n
<\/p>\n\n\n\n
Let\u2019s say you borrow some dough and want to preserve a few bob for<\/p>\n\n\n\n
emergencies. You also want to pay down debt as fast as you can.<\/p>\n\n\n\n
Maybe you want to park your money in an account that pays you no<\/p>\n\n\n\n
interest but offsets that balance against your loan balance. For you the<\/p>\n\n\n\n
interest rate question has been answered. It\u2019s gotta be variable.<\/p>\n\n\n\n
Provided your loan has a redraw facility and redrawing funds doesn\u2019t<\/p>\n\n\n\n
create a tax problem there seems no need for an offset account. Just<\/p>\n\n\n\n
pay off more than you must and know that if a nasty surprise arrives you<\/p>\n\n\n\n
can redraw the funds. The banks tend to promote offset accounts which<\/p>\n\n\n\n
seemed weird to me if a paydown and redraw facility is available.<\/p>\n\n\n\n
<\/p>\n\n\n\n
Then I read ASIC\u2019s annual report on areas they will be focusing on in<\/p>\n\n\n\n
the banking industry. Turns out some banks hadn\u2019t been properly<\/p>\n\n\n\n
linking offset accounts to loans, and some hadn\u2019t been offsetting<\/p>\n\n\n\n
interest at the same rate. To be fair some banks self-reported these<\/p>\n\n\n\n
\u201cdiscrepancies\u201d while others got caught fair and square. I reckon these<\/p>\n\n\n\n
dramas are almost always related to outdated IT and rarely if ever an<\/p>\n\n\n\n
evil plot. Having said that, will the Australian banking industry ever sort<\/p>\n\n\n\n
out these dramas and cease paying fines to the regulator? I have no<\/p>\n\n\n\n
idea\u2026\u2026\u2026\u2026\u2026\u2026. Do they?<\/p>\n\n\n\n
<\/p>\n\n\n\n
In closing some clarifying remarks:<\/p>\n\n\n\n
RBA is the Reserve Bank of Australia, not Resort Brokers Australia.<\/p>\n\n\n\n
Stop it you guys.<\/p>\n\n\n\n
Negative gearing is, of itself, a complete waste of time and money.<\/p>\n\n\n\n
Don\u2019t do it for its own sake.<\/p>\n\n\n\n
Borrow as much as you can, make sure you spend the money on an<\/p>\n\n\n\n
appreciating income producing asset and pay it off as fast as you can.<\/p>\n\n\n\n
Debt is good but only if it builds wealth. Debt for a new TV is bad.<\/p>\n\n\n\n
Always trust your finance broker.<\/p>\n\n\n\n
None of this is financial advice.<\/p>\n\n\n\n
Please consult someone who has an idea.<\/p>\n\n\n\n
If you really want to be guided by Shakespeare, may I suggest Side 1,<\/p>\n\n\n\n
Track 2 of Making Movies. Will it change your life? I have no idea.<\/p>\n\n\n\n
How did I become so opinionated and grumpy, and how does the<\/p>\n\n\n\n
managing director put up with me? I have no idea.<\/p>\n\n\n\n
In memory of my Dad, Ross Phipps (1935-2025), who loved these<\/p>\n\n\n\n
articles. What a great role model\u2026.. you have no idea.<\/p>\n\n\n\n
Mike Phipps F Fin<\/p>\n\n\n\n
Director | Phippsfin Pty Ltd<\/p>\n","protected":false},"excerpt":{"rendered":"
Most months I have trouble coming up with something half intelligent and hopefully entertaining to say in these bulletins. This month is different. World events,…<\/p>\n","protected":false},"author":1046,"featured_media":5066,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"_mbp_gutenberg_autopost":false,"footnotes":""},"categories":[3,19,7,15],"tags":[],"class_list":["post-5068","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting-and-finance","category-facilities-management","category-general-interest","category-motels-and-hospitality"],"_links":{"self":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/5068","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/users\/1046"}],"replies":[{"embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/comments?post=5068"}],"version-history":[{"count":1,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/5068\/revisions"}],"predecessor-version":[{"id":5069,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/posts\/5068\/revisions\/5069"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media\/5066"}],"wp:attachment":[{"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/media?parent=5068"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/categories?post=5068"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.theonsitemanager.com.au\/news\/wp-json\/wp\/v2\/tags?post=5068"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}