Welcome to 2019 - Investment Outlook

Andrew Thomson - General Manager

As we all return from our well earnt Christmas break, predictions for 2019 are reaching fever pitch and this year - for the first time in a long time – those predictions might be more reliable than our national cricket team… and that’s not a commentary on the quality of predictions!

Andrew Thomson - General Manager

In the past 10 days alone, I’ve heard interest rates are rising, interest rates will hold for at least 2 more years and even that they could crash again to stimulate a soft market stuck in regulatory purgatory thanks to the Hayne Royal Commission. This is despite the fact that, as most mortgage holders found this year, the RBA doesn’t have to do anything for you to experience a rate rise as the banks hit most of us with a rise mid year regardless! The lending environment is getting a bit tighter (probably should be too), mortgage stress levels are soaring and the media is relentlessly talking down the ‘property market’ with zero analysis to support the hysteria. Yes, Sydney and Melbourne are likely due for a small correction – however, as it was so eloquently put in an article I read in December, ‘this is merely the froth being blown off the top of a rather tasty beer’. In simple terms, if something goes up 70%, then goes down 10% - its still up 60%! That 10% correction only impacts a small % of people who will experience little more than some post purchase regret.

Looking at other markets, like the ASX as an example – property again was a shining light in 2018. The six largest IPO’s on the ASX in 2018 experienced an average decline of 30% and even worse - if you participated in a share placement with RCR Tomlinson or Blue Sky Alternative Investments, you’ve likely lost all your capital or close to it.  Meanwhile, in the property sector on the ASX, virtually every single major deal from 2018 is at or above issue price, a superb result given the volatility which has sent so many capital raisings and IPOs outside the property sector into a downward spiral.

Looking forward, regardless of your political persuasion – it’s almost certain we will have yet another new PM by the middle of the year, with Bill Shorten and the ALP merely having to turn up to win in a landslide.  With this in mind, the ALP have many policies in place that could impact both the ASX and the property market. This is most certainly not an assessment on the quality or otherwise of those policies, but merely an outlook on their impact. Removing negative gearing on everything but new properties would on the surface appear quite appealing to a business like ours, who delivers upwards of 500 new properties to the market each year; however it would also massively impact the saleability of existing properties under the grandfather provisions and the re-saleability of new ones purchased with negative gearing still available to the purchaser. Further, the ALP is expected not to allow any company tax cuts, nor any other provisions that would see earnings or capital growth. These policies are both good and bad depending on what political sphere you choose to look through, but one thing for certain is that it will create an environment where it will be difficult for ASX-listed companies to deliver earnings growth to provide quality yields - or have any reason for capital appreciation via their share price growth. Again, much like negative gearing being removed, this is likely a positive for CFMG Capital as investors look for alternative ways to build their wealth, with the CFMG Land & Opportunity Fund one of a myriad of channels available to investors looking to exit the equities market.

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While the media continues to harp on about ‘the property market’ as though its one single entity, observers who then read beyond the headline will see that South East Queensland (and Hobart and Darwin!) have delivered consistent and linear growth for 12+ months now, with virtually every single forecast available showing South East Queensland continuing this trend.

Putting all this aside, CFMG Capital had a magnificent 2017 as well as 2018 and we expect more of the same in 2019. Several projects via the CFMG Land & Opportunity Fund will be coming to an end in 2019, and hundreds of our loyal investors will have their 12% per annum returns and initial capital delivered back to them. We will likely be closing out two offers this month alone and launching two exciting new offers in the first half of the year at least, with the finishing touches on one of them likely having it ready for launch before the end of January. There is a significant waiting list already in place for the January offer, but should you wish to get a sneak peak – you can always drop me a line on info@cfmgcapital.com.au and some preliminary info will be available.

As you make your way through January, the team here at CFMG Capital hopes you had a fantastic break and wish you a happy, safe and prosperous 2019.