CFO On The Go Pro

06/09/2023

All signs point to migration driving Australia’s next property upturn.

More than 1.5 million migrants are expected over the next five years, and they’ll need somewhere to live. It’s one reason why housing price growth – especially in Sydney and Melbourne – has been sustained through 12 successive interest rate hikes.
Core Logic data suggests the last time housing values trended higher through a rising interest rate environment was the mid-to-late 2000s – a period when surging net overseas migration also boosted housing demand.

But before you race to invest your capital in a high-end collection of luxury residences, it’s important to note international students make up almost half this year’s projected intake.
So, the focus right now is on affordability.
“We are starting to see more affordable housing transactions, including student accommodation, boarding houses and build-to-rent in higher density areas, close to universities,”
Around 70% of migrants tend to settle in Sydney and Melbourne, but land values in Sydney are still relatively high. Melbourne’s inner city, Brisbane’s inner city and the Gold Coast may hold more potential for capital gain.

04/09/2023

Prices surge as the spring selling season starts.
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Home prices continued their upward trajectory in August, with expectations the spring selling season will start with a bang.
National home values rose for the sixth consecutive month, up by 0.8 per cent in August according to CoreLogic’s latest Home Value Index (HVI) as the typically busy spring selling season kicks off.
CoreLogic’s HVI has risen 4.9 per cent since bottoming out in February, with $34,301 being added to the median dwelling value.

The gain in August was a slight acceleration from the 0.7 per cent recorded in July, ceasing the two-month trend of slowing value gains in the capitals, according to CoreLogic.
The HVI showed a rise in dwelling values in every capital city except for Hobart, which saw a drop of 0.1 per cent.
Brisbane led the rise in values this month, up 1.5 per cent, followed by Sydney and Adelaide tied at 1.1 per cent, Perth at 0.9 per cent, Darwin at 0.8 per cent, Melbourne at 0.5 per cent, and Canberra at 0.3 per cent.

Commonwealth Bank of Australia (CBA) senior economist Belinda Allen said the pace of price gains have exceeded the major bank's expectations.

"In May; we forecast national home prices to rise by 3 per cent in 2023 and a further 5 per cent in 2024.

"The May forecast has already been met this year. Gains in calendar 2023 to August sit at 4.7 per cent.

"Given the current momentum in the market we revised up our estimate for home prices gains in 2023 to 7 per cent last week. We still expect a 5 per cent gain in 2024," Ms Allen added.

Furthermore, AMP Bank chief economist Shane Oliver stated: "The rebound in prices since February reflects a surge in underlying demand on the back of high immigration and constrained supply dominating the negative impact of higher interest rates."

"Our base case is that property prices have seen the low for this cycle and will rise around 5 per cent next year as interest rates start to fall."
Research director at CoreLogic, Tim Lawless, noted the diverse trend in housing values, albeit generally positive.
“Sydney has led the recovery trend to-date with a gain of 8.8 per cent since values found a floor in January this year. Brisbane has also posted a strong recovery with values up 6.2 per cent since bottoming out in February,” Mr Lawless added.
“At the other end of the scale, some other capital cities are better described as flat, with Hobart home values unchanged since stabilising in April, while values across the ACT have risen only mildly, up 1.0 per cent since a trough in April.”
Meanwhile, Prop Track’s Home Price Index gas also recorded a rise in national home According to the index, national prices are now 2.64 per cent higher than this time last year and up 3.51 per cent so far in 2023.
Excluding Darwin, which saw prices fall 0.38 per cent, all capitals saw gains in August, led by Adelaide at 0.64 per cent, followed by Sydney (0.47 per cent), Perth (0.31 per cent), Hobart and Brisbane (tied at 0.27 per cent), Melbourne (0.15 per cent), and ACT (0.14 per cent).
Once again, Sydney is leading the overall recovery, with prices up 6.19 per cent from their November 2022 trough and 1.29 per cent below the February 2022 peak.
Prop Track senior economist Eleanor Creagh said: “August marked the eighth consecutive month of national home price growth.
This is the longest period of consecutive monthly growth since the pandemic boom when prices rose for 23 months straight between May 2020 and March 2022.”
Ms Creagh added that national home prices have regained the majority of price falls seen last year, as strong housing demand with a limited flow of new listings hitting the market offset the impact of interest rate hikes.
The price increases come as the spring selling season starts, with CoreLogic's auction market preview for the week ending 3 September 2023 showing that 2,401 capital city homes are expected to go under the hammer this weekend, up 5.4 per cent from the previous week (2,278). This would make it the third-busiest auction week over the year to date.

03/09/2023

Australia’s small business owners are vulnerable in today’s inflationary environment.
That’s why it’s essential they stay in front of the next price hike – embracing short and long-term strategies to protect their balance sheet and bolster their chances of success.
Understanding the challenges
Not only do small business owners face higher prices in their personal lives – in their own grocery bills, in their own mortgages – but they must also deal with the rising costs of doing business at a time when customers are thinking twice about their own spending.
The reality is that labour, energy, logistics and supplies have all become more expensive over the past 12 months. Yet small businesses don’t have the economies of scale that larger companies do to adjust their operations and absorb these additional costs.
Typically, they have less bargaining power with suppliers and can find it far harder to negotiate favourable terms. They also have less flexibility in their pricing.
In fact, many small businesses will forego a price increase for fear of losing customers. Or simply because they don’t want to be disloyal to the people they’ve known for years, even decades. They know only too well that customers are also struggling just now and will hesitate to make things harder for them.
Finding a happy medium
The problem is customers aren’t always able to remain loyal themselves. As the cost of living continues to rise, they are inevitably becoming more cautious about their spending habits and are actively comparing prices, seeking discounts and making more deliberate purchasing decisions. Many are opting for lower-cost alternatives or delaying non-essential purchases.
It’s not surprising. But it does mean small businesses have to make some difficult decisions – or risk the viability of their business.
Take one of our Western Australian clients. They’ve had a highly profitable manufacturing business for many years, with around $10 million turnover. Yet when I visited them recently, they were running at a loss.
The demand for their goods was still very much there. But when I looked at their balance sheet, it became apparent that the cost of all their inputs – their raw materials, labour, the servicing of their machines – had increased significantly, even as they kept their prices unchanged.
The pricing dilemma
While the solution appeared straightforward, it wasn’t at all.
Our client had done well by offering lower prices than their competitors and they didn’t want to lose that advantage.
They also weren’t clear about what an appropriate price rise should be. One of their inputs had risen by 50 per cent, another by 20 per cent, and yet another by a more manageable three per cent. It was difficult to know how to pull all this together and price their products appropriately – in a way that would protect their customer base and return them to profitability.
Knowing which triggers to pull when.
Of course, adjusting your prices is only one solution. It takes a multifaceted approach to combat inflation.
First and foremost, you need to assess your supply chain to identify cost-saving opportunities. You may renegotiate your contracts with suppliers for better terms or optimise internal processes to reduce waste and inefficiencies.
You might also want to consider diversifying your product or service offerings to capture a broader customer base.
However, you do also need to bite the bullet and review your pricing strategies to ensure they meet the increase in costs – sooner rather than later.
True, your customers aren’t going to appreciate paying more. But there’s every chance they’ll understand if you’re careful about your communication – if you explain why it’s needed and why the value of your products or services is still worthwhile.
Our Western Australian client had put things off a little too long, so finding the right strategy was challenging.
They needed to increase their prices, but when and by how much took some technical know-how, as well as an understanding of their market and their customer base.
It also required the guidance of a communication specialist. Business coaches can be a wonderful resource here, as can your local chamber of commerce.
Thinking long term
Getting on top of inflation doesn’t stop there though.
While it’s difficult to consider the bigger picture when you’re working to keep your head above water, it’s important to focus on long-term strategies as well as short-term measures. That way, you can future-proof your financial position beyond the next month or year.
For instance, it’s a great idea to invest in workforce training and development. Enhancing your employees’ skills and productivity will put your business in a fundamentally stronger position.
It’s also worth exploring digitalisation and automation to see if you can further streamline your operations.
Plus, you’ll want to consider contingency plans to mitigate potential disruptions. Building cash reserves and establishing lines of credit can provide a buffer during periods of economic uncertainty. It also pays to foster a strong network of industry peers and mentors who can provide valuable insights and support in navigating challenges.
Reaching out to others is always valuable. Your trusted business partners, suppliers or mentors can give your perspective or ideas about the best ways to move forward.

14/06/2023

Will our housing market cope?
f you live in a capital city you would be familiar with seeing the endless cranes on the skyline. You may be wondering where on earth people are going to come from to occupy this continual development. But they will fill – and fill fast.

We hear that Australia is in the throes of a housing shortage yet builders are going broke!

Rents are so high that more people are fast-tracking their purchasing decision simply because they can’t find rental accommodation.

Immigration projections are exceeding our housing capacity with the migrant population expected to have grown by more than 700,000 between the 2022 and 2024 financial years. Where are they going to live?

With net overseas migration at record levels and rising, there is a chance more permanent or long-term migrants who can afford it will skip the rental phase and fast-track a home purchase simply because they can’t find rental accommodation.

Homeowners are holding waiting for the next wave before they sell, and astute investors are preparing to pounce on a good buying opportunity.

Although we don’t have a property crystal ball, there are certainly signs that property prices across the country have bottomed out. In April we saw the first sign in nearly 12 months where there was an increase in the Home Value index reported by Core Logic two months in a row.

CoreLogic’s Research Director, Tim Lawless, said that, despite the divergence, the figures suggested Australia’s housing market downturn had passed.

“Not only are we seeing housing values stabilising or rising across most areas of the country, but a number of other indicators are also confirming the positive shift,” he said.

“Auction clearance rates are holding slightly above the long-run average, sentiment has lifted and home sales are trending around the previous five-years

Click the link for the full article.

https://intelligentaccountsandfinance.com.au/will-our-housing-market-cope/

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14/06/2023

05/06/2023

As we brace ourselves with baited breadth if RBA will increase the cash rate. This notice will not affect you as much if you had a good investment plan.

What is your investment philosophy?
In short, my investment philosophy is:
(1) always make decade-plus decisions
(2) invest a specific amount of cash monthly
(3) Only invest in high-quality, fundamentally-sound, evidence-based assets and
(4) use borrowings wisely.
We are bombarded with lots of stimuli by the media, on social media, through conversations with friends and family members, and so forth.
There’s always a lot of noise vying for your attention – much of it is negative because humans have a psychological and chemical bias for negative information.
But most of his stimulus is unhelpful and shouldn’t inform your decision-making.
That is why it’s very important for you to have a well-defined investment philosophy – to stop you from letting your emotions influence your important financial decisions.

01/06/2023

Breaking News - Good News For the Property Market

Individuals from India, New Zealand Germany Finland, Japan, Norway Switzerland and South Africa purchasing residential properties or land will no longer be required to pay surcharge purchaser duty or surcharge land Tax

Refunds backdated to 1 January 2021

On the 21st of February 2023, Revenue NSW communicated that NSW surcharge provisions are inconsistent with a number of International tax treaties entered into by the Federal Government

30/05/2023

Small Business & Individuals Financial Year-End Planning – Contact us for more insights.

The recent budget did not have any major changes or initiatives for the above. However, we have analysed and wish to highlight the following that could save you tax.

There is a small range of assistance for small businesses (defined as businesses with a turnover of less than $50 million per year). These are:
• An energy incentive that allows businesses to claim back 20% of the cost of purchasing items that either (i) move the business towards the use of electricity-powered items or (ii) see the business purchasing more efficient electricity-powered items.
• Small businesses will also continue to be able to access the instant write-off for assets up to $20,000 in value. This has been a feature of the last several Commonwealth budgets.
• First home deposit scheme and superannuation – Please contact us for more information on this. Very valuable savings but depends on the circumstances.
• No Fringe Benefits Tax on Electric cars. Novated leases can save you heaps.

Please contact us for a complimentary meeting.
Book a meeting – [email protected]

03/05/2023

We can leverage our extensive Finance experience and very large professional referral network developed over 30 years in the finance industry to provide an unbiased loan structure that best suits your needs