Greetings from the UK! This week I have been in the UK for some family matters and it has been quite interesting to observe how much the wheel has turned here. Three visits in 6 months or so and things in the motherland have changed considerably.
Without stirring the pot, a sunny English Summer, buoyed by a great year of sporting achievements (British Lions, Wimbledon, Tour de France and the Ashes) has lifted the national psyche, as well as the level of optimism and general activity. The last time I noticed this sort of feeling here was almost 20 years ago, at the beginning of the Tony Blair Leadership, where “Cool Britannia” ruled the waves.
Currently, the UK property market is cranking, and the stock market solid, sitting close to 5 year highs. Why the turnaround?
Low Interest Rates
The Bank of England has had UK interest rates at 0.5% for almost four years and that means a huge amount of stimulation has gone into the economy. Equally, the prospect for saving for a rainy day (never a bad thing in England) is not overly attractive, with Cash returns negligible. The money has had to go somewhere and real assets – read property and shares – have been the beneficiaries. A word of caution here – that is inflation has yet to get a grip – $5 for a PINT of Guinness (try that for a comparison) or $1.70 for half a dozen bananas would suggest that price jumps are inevitable.
Lets look closer to home
With Australia’s RBA chopping rates – in an effort to prop up an economy which is more battered than Rocky in Round 10 – we are seeing a similar medicine being applied – albeit a bit late in the day. The last 7 years of fiscal irresponsibility by the Government – has meant that the RBA defibrillators are being applied to restart the economy. There is likely to be a lag factor, but already the signs of a push higher in the property market and stocks are there. It is coming and for those that are part of it, will be very lucrative. Don’t arrive late to that party, if you are looking for growth and cashflow.
On that note, look out for the roll out of our investment property products in the next couple of months.
However, the real thing to look out for is inflation. Unlike the UK, in Australia, prices are already high and will likely be pushed harder by more money being forced out of the bank and into the economy. This will be very painful for many, but the flip side of that coin is that real assets (property and shares) will run hard – make sure you get your slice of the cake.
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