The Dot Update - March 2023
Welcome to this month’s edition of the Dot Update -
Another Interest rate hike
No surprise the RBA have moved again for the 10th consecutive month increasing the cash rate to 3.6%. Personally, I believe they’ve overstepped the market, not allowing the rate increases to take effect (usually 6-9 month lag from when the announcement is made).
I will continue to monitor the market for any changes and assuming your loan is managed by Dot, will proactively repricing your variable loan at different intervals to ensure the most value is attained.
Experts Move On Super Changes
Experts are already devising methods for investors who have Superannuation balances above $3 million to avoid being hit with higher taxes.
From 2025 the superannuation fund concessional tax rate will increase from 15% to 30% for taxpayers with balances above $3 million.
Cameron Harrison, Partner, Anne-Marie Tassoni, says most affected people will simply restructure their finances and invest anything above $3million elsewhere.
She says some might consider drawing down on their superannuation above $3 million and contribute to the superannuation accounts of their children.
Tassoni says this will help prevent “frivolous consumption” by the children, who will have to wait many years to access the money.
Other analysts suggest tax-efficient investment bonds, or discretionary and testamentary trusts.
Anna Hacker, of Pitcher Partners Advisory, says investors might need to be a bit more creative, while Australian Unity head of strategy Greg Bird, warns the changes will affect a wider group than just people with a super balance of $3 million.
Building Slump Further Pressures Rents
Building approvals have slumped to their lowest levels in more than a decade. The reduction in supply puts further upward pressure on residential rents.
Australian Bureau of Statistics figures show total new approvals were down almost 28% in January with 12,065 approvals the lowest figures since July 2012.
Standalone home approvals dropped 13.5% in January, while apartments, townhouse and semidetached homes approvals dropped by 44%.
BIS Oxford Economics senior economist Maree Kilroy says increasing interest rates are stopping people from committing to new housing.
She says further rate rises will impact on the demand for new homes.
“Inquiries for greenfield land and off-the-plan apartments are down sharply on a year ago and are set to remain weak over the year ahead,” she says.
“For households that put down deposits on land lots over 2021 and 2022, finance at settlement has become challenging.
“Financing the build stage has similarly become tougher, where higher borrowing costs and a near-30% run-up in construction costs are both impacting.”
As always, we hope you enjoyed reading the blog and should you have any questions, please feel free to email Connecting@dotfinancial.com.au or you can call us on 1300 000 DOT (368).