Bruce Brammall is one of Australia’s foremost financial commentators and Authors. He is a renowned superannuation editor and columnist at Eureka Report, Herald Sun, Daily Telegraph, Courier-Mail, Adelaide’s Advertiser, and The West Australian.
As well as having his regular column’s in some of Australia’s most respected financial papers, he also has his feet firmly on the ground and is a licensed financial adviser and mortgage broker. Jason Penna from PropertyBooks.com.au recently interview Bruce to find out what his thoughts were for Property in 2015 and where he thinks interest rates might be headed.
Bruce has a new book due out in March 2015 – Mortgages Made Easy – to be the first to get yourself a copy make sure you sign up to the PropertyBooks.com.au newsletter – Sign Up Here and you will also receive a FREE DVD
1) Going into 2015 what do you see as the biggest challenges for Property Investors?
“not overpaying for property” – Bruce Brammall
I think it’s the same problem they face every time they go to buy – not overpaying for property. Overpaying is death for investors. Part of not overpaying is about not buying property at the wrong time of a cycle in a particular city. But I’ve got rules about what I buy, which include nowhere but Sydney, Melbourne and Brisbane, as I believe they are the only markets with economies that are diverse enough to handle economic downturns. I’m not saying that Sydney is overpriced (at time of writing in January 2015), but it has clearly been running hardest. There will be pockets of Sydney that are still reasonably good value. I think there is still some good value in Melbourne. My feeling is that Brisbane is probably under-priced. Rents there are particularly strong, growth has been low to non-existent and there is plenty of ability to buy property in Brisbane that should be great in the medium and long terms and possibly even in the short term. That said, if you buy rubbish property, it’s always going to be rubbish property. Avoid units and property without reasonable land content, no matter where you are.
We’re likely to have rising interest rates at some point, though it would not appear likely in the short term. So making sure you don’t over commit when debt is low should also be a consideration.
2) Bruce, you are the Author of a number of books on Property Investing and an advocate for what you call “great debt”. Can you explain “great debt” a little further?
“Great debt is both a tax deduction and for an asset that is likely to increase in value” – Bruce Brammall
I believe there are three kinds of debt – great, okay and dumb. Great debt is both a tax deduction and for an asset that is likely to increase in value, such as property and shares. “Okay” debt is for things like homes and tax-deductible, though depreciating, assets (such as work cars, or equipment). Dumb debt is for things that are neither deductible, nor likely to appreciate in value, such as whatever you spend on a credit card, or most other consumer items.
I’ve never been comfortable with the good/bad debt delineation, because it lumps your home mortgage into “bad” debt. How is taking on a home loan a “bad” thing to do, when homes usually increase over time?
3) For first time home owners who are considering either purchasing a principle residence or staying at home for a couple more years and buying an investment property, what would be your best tip?
“An investment property is about one thing only – making money” – Bruce Brammall
Understand that they are two different purchases. I think a home is the “cornerstone” of most people’s investment strategies, even if I don’t believe a home, per se, is an investment itself. A home is about meeting emotional needs, such as what suits you and/or your family. An investment property is about one thing only – making money. I bought an investment property first and that worked for me. For others, it will work better to buy a home, develop some equity, then purchase investment properties. One consideration is what sort of stamp duty concessions are available in your state – and they differ wildly, as I discovered when researching my latest book, Mortgages Made Easy (due out in late February, 2015). It’s not that I didn’t know they differed between states, but they have changed so much in such a short number of years. Some states offer incredible incentives for first home buyers. But you obviously lose that if you buy an investment property first. Don’t base it purely on that. It should be about what’s more important to you – having a home that will provide you with the joys of home ownership, or making money. Make that decision first, then worry about stamp duty concessions.
4) What do you expect interest rates to do in 2015 and can you see any short-term risks to investors?
“I didn’t think they would stay as low as they have for this long” – Bruce Brammall
I couldn’t believe interest rates got as low as they did. When they were cut from 3% to 2.5%, I had thought that the next move would be up. That’s partly a natural conservatism – I don’t want clients to believe that the current low rates are the new normal. I didn’t think they would stay as low as they have for this long. As at January 2015, we haven’t had a move for 17 months. However, with unemployment now rising, it seems like the pressure is for, potentially, lower rates, rather than higher. But, balance that with strong rises in several property markets and … it’s getting hard to call. I think, most likely, that we’ll stay where we are at now for a while. I don’t think we’ll get any changes in the first few months of 2015, but if we do, it’s more likely to be downwards. I don’t like trying to predict interest rates more than about six months out, but if I’m pushed, I would probably say “starting to rise”. It’s my defensive nature. Rates are abnormally low right now.
5) How else can our readers contact you? and what other services do you offer?
You can send me an email directly through firstname.lastname@example.org, check out our website at www.brucebrammall.com.au (a new one, www.brucebrammallfinancial.com.au should be up by the end of January 2015), or simply call the office on 03-9020-2905 and one of the growing BBF team will be able to get you in contact with the right BBF professional for your needs.
I’m both a financial adviser and mortgage broker, through Bruce Brammall Financial. We offer mortgage broking for home and investment purchases and full financial planning services, covering insurance, superannuation and investments. While I’ve written six books covering property investment in one form or another, I’m not licensed to provide direct property advice. I have general rules for buying property as an investment. But we then work with other professionals (fee-for-service advocates) in this area, to make sure that our clients get consistent quality advice.
Most importantly, look out for my new book, Mortgages Made Easy (Wrightbooks, 2015) which is out towards the end of February 2015. It is predominantly about making sure you are armed with the best knowledge to get the right mortgage for your situation, peppered with plenty of general property advice from a long time in, and writing about, property investment and mortgages.