There has been plenty of talk about 2021 being a very opportunistic year, and at PGA Advisory we couldn’t agree more! There are a combination of factors that have come together to create some ideal circumstances in the world of finance and real estate.
Firstly, last year was tumultuous to say the least but it was also very rewarding for many people. We saw plenty of people taking their finances more seriously by taking action and implementing strong pillars to ensure financial security. On the flipside, we also came across many people who were (and still are) putting off taking control of their finances. Now is the time to be smarter than we ever have been with our money and to take advantage of what is available to us. If we take action now, we'll reap the benefits in the years to come.
Secondly, back in October the Federal Government said the current credit laws were outdated, particularly given the economy had been plunged into recession because of the pandemic. It proposed new laws to reduce verification procedures, meaning borrowers would not need to hand over as much information to banks and, in turn, shortening the length of time it takes to secure loans. Borrowers would also be made more accountable for providing accurate information to lenders under the new laws, which will come into effect in March if they pass Parliament, and will replace the current practice of 'lender beware' with a 'borrower responsibility' principle. The Government said strong consumer protections would be maintained under the law changes and credit providers would still need to comply with their existing licensing obligations to act efficiently, honestly and fairly.
Thirdly, interest rates are at the record low of 0.1% meaning it is as cheap as it ever has been to borrow money. The Reserve Bank outlined it did not expect to raise the cash rate over the next three years until actual inflation is sustainably within the 2% to 3% target range, which will require wage growth and significant gains in employment. Inflation is forecast to be 1% in 2021 and 1.5% in 2022 according to RBA. This will provide homeowners and business with some certainty over their individual borrowing rates in the near term.
Finally, the property market is booming. The proof is now in the pudding that people should have purchased last year as property values are steadily climbing. On top of that, the commercial real estate market is feeling the pain as more people are working from home. Because of this, regional areas outside of Melbourne and other capital cities have gone up significantly and the trend is more than likely to continue as working from home has become a part of the new normal.
With all of these factors considered, we can be optimistic about the year ahead. We've handled the virus incredibly well, and although the pandemic isn't over, we should all be inspired by how much we've been though and by how far we have all come. Being unsure of what is ahead of us is something that we all need to embrace. There was uncertainty with the GFC, there is currently uncertainty with the pandemic, and there will be uncertainty again. Uncertainty calls us to implement strong financial pillars to hold down the fort when times get tough. Let's focus on all of the opportunities that are available to us and make 2021 a year to remember.
