Firstly, I would love to hear from our retiree community as to the changes they’re seeing within their own communities.
What shifts have we as a firm noticed over the past few years? When Covid hit and lockdowns were implemented, the majority of the population felt isolated and the retiree demographic lost a couple of prime years for enjoying this important life stage. Depending on where retirees lived and the rules in your particular area, not to mention personal health status’, some retirees were able to emerge from lockdown sooner than others. We saw the majority jumping straight back into their original plans, making up for lost time – which was great to see!
So, what were some of the most popular choices following the pandemic?
Notably, we had (and continue to have) the GREAT AUSSIE TRAVEL BOOM! Retirees were buying new 4WD rigs and a caravan, setting off into the sunset to catch up on those (unavoidably) displaced years. Some of our clients were even committed enough to sell the family home, however a number took advantage of increased rental returns and found tenants to occupy properties.
Financial ramifications…
As most of us are aware, new cars became more expensive and supply under strain. Likewise, caravans have become more expensive and harder to come by. For those not looking to travel, more money was invested within the family home.
The increasingly popular work-from-home model kept some in the workforce however pressure in the business world and isolation factors caused some to choose an earlier retirement. This was certainly a difficult period and we think it’s safe to say that we all did what we thought was best during uncertain times. My team put enormous effort into supporting our clients with tailored approaches that would help them through this uncertain period. The general consensus throughout our client community was appreciation for the way in which professional financial advice is so much more than simply ‘managing super accounts’, particularly during times like these.
Now…
It is fabulous to see overseas travel pick up, with Europe (by far) the destination of choice! Asia seems to be slowly gaining in popularity (again) however we are still seeing masks which are no doubt off-putting for those seeking a carefree holiday, and in some of these regions Covid is still, unfortunately, a bigger issue than it is here in Australia.
We are also seeing the 30–40-year age group pulling the kids out of school and hitting the road to see Australia, or even venturing abroad. What long-term effects this movement will have only time will tell as this hasn’t been a popular choice in the past. I think it’s safe to say that the kids who dealt with Covid during high school and who are now attending University may be one of the most resilient cohorts to come through.
Financial ramifications…
A caravan should not sell 2-3 years later for more than what you paid for it.
A car should not sell 2-3 years later for more than what you paid for it.
Your house should not go up in value 20-30% over a few years.
Despite the unique times we have witnessed where yes, these things have happened, we need to remember this was NOT normal. We must be mindful that a more realistic future is headed our way.
Let’s talk about what SHOULD happen…
Cars & Vans
The supply of cars will and has improved. (not across the board but slowly)
There are caravans in yards and demand should decrease, as more people feel comfortable heading overseas.
There should be more second-hand 4WD and caravans for sale. We know that our clients are listing vehicles for sale and are not getting the overwhelming demand we were seeing.
Boats and Jet Skis do tend to get sold first in an economic slowdown. Often, it’s the boats first, as they do cost a lot of money to run and maintain.
Houses
Interest rates have increased the most in living history, which obviously influences household cashflow…leading to a negative effect on spending and borrowing capacity.
THIS WILL AFFECT THE FLOW OF MONEY IN THE ECONOMY – this is cashflow and supply + demand 1 0 1.
I am personally interested to see what affect purchasers coming from overseas will have on our economy. We are seeing an obvious increase in international buyers placing bids on waterfront property which in turn supports this unusually high demand. In my opinion it’s not particularly fair on Australian taxpayers who have contributed for countless years to be outbid by an international newcomer and then struggle to obtain property in their own home country. It’s becoming increasingly difficult to compete and this is certainly an issue that should no longer be overlooked by our government. My biggest fear is that any forthcoming slowdown and decrease in property prices will not be the rightful benefit of our children, but the benefit of these international buyers.
Moving onward, trades are still difficult to obtain as there is a lot of government spending on projects which utilise these industries leaving less capacity for private work. Renovations in turn have become extremely expensive and quality trade workers are becoming difficult to come by, being pushed beyond timeframes not to mention the budget blow-outs. Much of our retiree community are choosing to defer these types of projects at this time.
Financial Ramifications
We’re no longer seeing the eye-watering gains we did see over the past few years. I know this is a broad comment but on a household level, my message is that people must expect a slowdown and we may even see households needing to downsize to support cashflow issues. Following these shows on 4CRB I often speak to listeners who want to discuss a property strategy during these changing times. Some people are now looking to sell their rental properties despite the recent increases in rental yield of late, which is a completely valid option at this point in time. Many people desire a combination of rental property income and liquid assets. This is simply speaking from my own experience within my local community, and we do continue to see fewer homes listed for sale overall which speaks to a majority willing to ride out this next cycle.
Super & Investments 2023 Financial Year
It has been a good year for returns for a lot of people. As an example, our clients with a Balanced approach have achieved over 10% this financial year and Growth Investors over 14% for this financial year as at 19th June. (The date I prepared some of this research). There has been a great deal of difference in returns between different balanced approaches in 2023. As always, please do seek personal advice based on your personal situation from a qualified financial adviser.
Cash & Term Deposits
Facilitators are now paying over 5% for term deposits. This is some good news for retirees holding some cash as there was a long period where term deposits were not a valuable option for investors.
Read Troy’s Background Research and Analytics.
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