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Firstlinks newsletter - 5 December

Graham Hand  |  05 Dec 2019Text size  Decrease  Increase  |  
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Morningstar acquired Cuffelinks (Firstlinks) in October 2019. Join 60,000 unique users and receive the Firstlinks weekly editorials and free investment ebooks.

I doubt the Reserve Bank Governor, Philip Lowe, is looking for a new home at the moment. If he were, he would know first-hand that Sydney residential is red hot, and it might make him think again about cutting rates further. For the first time in 30 years, I am looking for a new home, and it's clear from the competition that FOMO has replaced FONGO (Fear of Not Getting Out) in the last six months. Selling before buying can quickly become expensive.

In early November, a local real estate agent listed 32 properties for potential sale in its auction rooms on 28 November. Only seven homes made it to the auction as all other sellers accepted early bids, and six sold on the night. Quality apartment developments are again selling out in hours. For many Boomers, 'downsizing' means a prestige apartment rather than a house, and it doesn't mean downsizing in property value. They can also enjoy the downsizer policy which allows a couple to put another $600,000 into super from the proceeds of selling their home, even if they already have more than $3.2 million in super. 

CoreLogic data shows capital cities prices were 4.6% higher (Melbourne 6.4%, Sydney 6.2%) over the three months to 30 November 2019, and cashed up Boomers are sending the upper quartile even higher.

3c 7c 483 b 43 a 3 49 f 5 aff 5 01 a 5fdd 43318

Source: CoreLogic, as at 30 November 2019

Elevated prices will push out the timing on the following chart even further for many. The chart comes from last week's article on housing and ageing, and shows the deferred entry ages for major life events. Buying a first home has gone out from 27 to 33 years-of-age and paying off the mortgage from 52 to 62. The good news is that living longer means the benefits of home ownership can still accrue over time.

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6f 267 c 15 e613 46 c 3 a5 e 9 4da 0ccbc 87 f 9

Source: CEPAR analysis based on ABS Census, customised ABS data, ABS SIH, and customised AIHW data.

In this week's new articles ...

Investors desperate for income but scared of equity risk are flocking to new fixed income Listed Investment Trusts (LITs). However, those who equate 'bonds' or 'loans' with traditional defensive characteristics must understand the risks they are accepting. These funds are not a place to store genuine cash. In a week when bank shares fell heavily, investors need to appreciate the risks of capital erosion as they search for income.

It's always a fun article when Shane Oliver takes us through some of his favourite quotations on investing and life lessons, with a collection of gems and timeless wisdom from global leaders in their fields.

Many fund managers who built their reputations on analysis of company valuations are facing up to the challenges of pricing expensive growth stocks. Warryn Robertson argues the market cannot have it both ways: it cannot value companies based on low interest rates while assuming strong economic growth. 

Two articles in one on a new survey on financial advice and attitudes to retirement. Matthew Harrison and Emma Rapaport show the Retirement Income Review faces major challenges to improving the lives of retirees.

Managing an SMSF involves understanding the rules and opportunities. Lawyers William Moore and Sam Baring say SMSFs are becoming a battleground for family disputes, while Julie Steed warns of the little-known consequences of bankruptcy.

The chair of APRA, Wayne Byers, has strongly defended the regulator's plan to become more involved in executive pay, but Will Baylis believes there are more dangers than benefits in APRA's move. We also attach a separate survey on salaries in financial services to give some context.

The Education Centre features the usual ETF and LIC updates, and the Sponsor Noticeboard includes a summary of the BetaShares/Investment Trends ETF Report for 2019 showing continuing strong growth.

This week's White Paper from Neuberger Berman describes 10 themes they expect in markets in 2020.

is the editorial director of Morningstar Australia

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