Wednesday, March 31, 2010

Retirement Strategies 1 April 2010

an investment property under construction for a private client (right)


A) The ANZ Bank doesn’t think so:

The December 2009 issue of the ANZ Bank’s “Australian Property Outlook” was unequivocal – the housing shortage is here to stay and will reach unprecented levels.

The underlying demand for new houses will remain around 200,000 for the next few years, but completions will remain around 150,000.

So each year the shortfall is the difference – 50,000 dwellings.

The cumulative impact will be a shortage of 600,000 dwellings by 2015 with the obvious outcome that house prices and rents will continue to rise.

B) The RBA doesn’t think so

“Over recent years the rate of increase in the number of dwellings has been below the average of the past 50 years” said Dr. Philip Lowe – Deputy Governor at the Reserve Bank of Australia - at the conference of the Urban Development Institute on 10 March.

“In contrast, the rate of increase in the population growth has been around the fastest in 50 years”.

He went on to explain that the continuing escalation in the resources boom – especially now that India is adding to demand for Australia’s minerals – will mean that the national shortage of manpower will prevent any catch-up in the housing sector any time soon.

Consequently he expects that house prices will rise sharply over the next few years – notwithstanding the impact of forecast higher interest rates.

If you are in your 50s, and probably still with a mortgage on your family home, contact me – Bernard Kelly - anytime so that I can help you neutralise that mortgage via the very successful investment strategy that I share with my private clients. My email is


Recently I was asked “because you are so negative about superannuation, are you suggesting that we should be 100% invested into residential property?”

The answer is NO – however here's what I think: we all have to understand the simple statistics of what superannuation can achieve, and I think all of us need develop an understanding of risk. I know that's a lot of thinking, but, seriously, that's what we need to do.

Smart retirement investing isn't a matter of sitting back and letting the managers of your superannuation fund invest on your behalf.

It's about building a diversified investment portfolio, specifically one that gives you a reasonable shot at getting you through retirement. And if you’re only into superannuation, you’re exposed to substantial risk – like we saw in the recent meltdown in the stock market.

So a proper balance means a mix of compulsory superannuation funds and property that not only can deliver the growth necessary to build a nest egg large enough to sustain you through a retirement that could very well last 20-25 years, but also provide decent protection against risk.

So to minimise risk, we need to diversify.

And as you are already into compulsory superannuation, you need to diversify. And the best product for that is not commodities, or gold, or anything exotic.

The best product for this purpose is old fashioned, and simple, residential real estate.


The government is finally admitting that most of us won’t have enough super for 20-25 years of a comfortable retirement.

This year there will be three – yes three – reports that will lay bare the inadequacies of the superannuation system.

Firstly there is the Henry review of the tax system, then the Cooper review into the structure of superannuation, and finally there is the Ripoll inquiry into the financial planning industry.

I say “the sooner the better”


According to data compiled by RP Data and published in mid March, it has been the lowest priced suburbs that have performed the best over the past ten years.

These suburbs are affordable to first home buyers, as their entry cost is lowest.

''Interestingly, the analysis revealed that affordable suburbs witnessed the strongest growth over the decade,'' RP Data said in a release.

13 of the top 20 performers still have a current median price below $300,000, while 18 of them are below $400,000.

And of course, the outer rim of Brisbane – but only around the south west suburbs – offers the best expectation (of the 35+ regional markets) of substantial financial gains with the lowest risk. And of course rents are relatively higher in Brisbane than anywhere else, and land tax in Queensland is the lowest for residential property investors.

The selection of the product i.e. the house itself, provides 60% of your success. The packaging that we provide generates the other 40% of your successful outcome.


At, we use research methodologies and due diligence processes to identify growth markets and how best to package residential real estate investments.

Of course, some clients have preconceived ideas about a desired location (usually somewhere they know, and where they can drive by occasionally) but research shows they most probably will generate greater returns and minimise risk by investing in a different product, and probably in another of the 35+ regional property markets across Australia.

The key criteria we looks at when assessing a property investment are the ideal tenant, the style of accommodation they require, relative rents, land taxes, economics and employment, population and demographics, infrastructure and government spending, and the balance between supply and demand.

This covers perhaps 60% of the ingredients for a successful investment.

The other 40% of success comprises the packaging i.e. the funding, the ownership structure, the insurances (both for the asset and also landlord rent risk insurance) the quantity surveyor’s report, a specialist property accountant - to get your tax back every payday – estate planning, powers of attorney and the asset manager.

We focus on your upcoming retirement. So we won’t be recommending the latest magic solution – whatever it is this month – with its associated toxic fees. Our solution is not complicated, and has proven itself over decades.

If you would me to help you explore your options, contact me – Bernard Kelly – anytime. My email is


In the debate between the industry funds and the private funds about embedded fees for financial advice, the research report prepared by Supermonics for the Industry Super Network (ISN) - representing the industry funds - cites Australian Prudential Regulatory Authority data showing a 3.6 per cent annual return for retail funds and a 5.5 per cent return for industry funds over the past 13 years.

3.6 per cent and 5.5 percent!

This result is only slightly better than bank deposits, which have virtually zero risk.

Back in 2003, it was the same sad story. Back then, the Australian Prudential Regulation Authority, said that, adjusted for risk, the average return on the profit-motivated retail superannuation funds was NEGATIVE.

Imagine if you had purchased a residential investment property in 13 years ago. Your income would have been around $40,000 and you would have paid out of your own pocket around $8,500 for the investment – priced at $150,000.

If that investment property is now worth around $400,000, it doesn’t take an actuary to realise that an outlay of $8,500 that returns a gain of $250,000 over 13 years far exceeds a return of 3.6 per cent or even 5.5 per cent!

If you want me to help you explore your options, contact me – Bernard Kelly – anytime. My email is


When our parents retired, they were advised to take their savings and lump-sum payouts and invest everything in "ultra-safe" debentures and the occasional blue-chip stock.

However our generation will enjoy longer and more active retirements, so the conventional wisdom is now to keep your retirement funds growing and defer a conservative investment strategy.

However if you rely on the advice of financial planners and television gurus, you will continue to add equities to your portfolio. The problem with that is that you will be adding to assets that tend to move up and down in the same pattern.

As recent history has shown, you can’t afford that risk.

Which is one of the reasons why I like residential investment property. Not only is it inflation protected, and can’t disappear (as is possible with major listed companies), but property adds diversification.

Real estate remains a smart choice for capital appreciation and income generation, and its inflation-fighting power is second to none.

However not all real estate can be expected to provide you with maximum benefits. Most products – such as inner city apartments, serviced offices, student accommodation, defence force housing etc – carry hidden millstones. The best product is a family home in a growth corridor.

If you want me to help you explore your options, contact me – Bernard Kelly – anytime. My email is


To enable you always to be keep abreast of new developments, we have now established a membership site.

Go to

You can either join as a Free or Full member.

Naturally Full members – who pay a modest $110 pa for membership – receive many more privileges.


You probably know many people who need my experience and expertise right now.

Here’s the deal – you invite a few people to a lunch or after-work seminar, and I’ll present Retirement Strategies for Employees.

I’ll pay you $150 for your expenses, and a further $1000 for every participant who has me share an investment property with them.

About Bernard Kelly:

Bernard Kelly BEcon MBA CRPC Australia’s Retirement Strategist, is a highly sought-after advisor, retirement authority, thought-leader, author and radio commentator because he makes the complicated and mundane topics of investing and retirement fun! Bernard has over 20 years experience providing families with financial thought. He is the author of Live Your Dreams in Retirement, Property Investing for Couples, Goolwa by Breakfast and Raising Decent Kids into Substantial Wealth and publishes a fortnightly newsletter that reaches thousands of subscribers worldwide.

19 Prospect Street, Box Hill 3128 Australia. Tel 61-3-9899 8577 mobile 0414 778 518



Post a Comment

<< Home