With 2019 already underway, many of us are thinking about how we are going to achieve our New Year’s resolutions. For many people, saving more money tops the list. If you are looking to get your finances sorted in 2019, start by setting your goals. But before you start planning out how to make them happen, it is a good idea to understand what external factors might be affecting financial markets in 2019, and how to take advantage of them.
2019 is set to be a big year for change. Not only because of the looming Federal Election, but also because we expect an increase in regulations for the financial services industry as a result of the Royal Commission. Here are some key areas we think you should take into account before planning your financial goals:
Real estate
Auction clearance rates are currently at a six-year low. The Australian Financial Review recently reported that in the last three months of 2018 Sydney property prices fell by 15 per cent on an annualised basis, followed by Melbourne’s 12 per cent, with big falls posted in other major capitals. The lending criteria has been tightened recently and may tighten even further in 2019. These factors, combined with low wage growth, have many analysts predicting the continued fall of housing prices in 2019.
So what does this mean? Well, for first home buyers, this could provide an opportunity to get into the property market. We are even seeing some of our clients putting off property purchases a little longer in the hope that the market continues to fall.
For those of you that are heading closer to retirement, we are seeing clients bring forward their downsizing plans to take advantage of the government’s ‘Downsizing Measure’. This legislation allows you to contribute $300,000 from the proceeds of the sale of your home to superannuation. Depending on your circumstances, the ‘Downsizing Measure’ could be an effective way to boost your superannuation savings.
Record low interest rates
With interest rates sitting at the record low of 1.50% and some analysts predicting no change before 2020, it’s the perfect opportunity for you to use these rates to your advantage.
Simply cutting down your everyday costs and using the money saved to repay any debts you may have, such as loans, mortgages or credit cards, is a great way to take advantage of low interest rates.
Federal Election year
With a Federal Election expected by May this year, it is worth keeping an eye on proposed policies that will be laid out over the next few months. For example, the Labor opposition has already indicated that it wants to make changes to franking credits and negative gearing.
At this stage, what these proposed changes would mean for you is not easy to calculate. However, with proposed policies like the changes to franking credits, the impact on each person will be different, depending on factors such as how your assets are structured, your income, and your franking credit position. Even if these policy changes don’t affect you directly, it is important to think about any potential side effects they might have on the market. For example, could there be less demand for franked Australian shares and more demand for property and unfranked shares, including international shares?
Share market volatility
With market volatility expected to increase in 2019, we suggest closely monitoring the markets and global events, such as potential US interest rate increases and growing political tension with China, as they may affect investment portfolios. For example, cash may be king in the year ahead, being available to take advantage of significant market volatility.
With so much change expected in 2019, an election, and the predicted instability of the global market, we suggest working with a financial adviser to help you set your financial goals and analyse the merits of potential investments before you dive into the market or make changes to your portfolio.
General Advice warning
The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL 436121 ABN 49 159 583 847) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.
