Friday 16 May 2008

Property portfolio update: May 2008

The latest monthly sales figures (April) for the suburbs of our home and investment property have just come out. Last month the total value of my equity in our home and rental property dropped by around $15,000 (which will be a drag on this month's net worth figure), but the latest figures shows a gain of around $20,000 - bringing the value of my property portfolio equity to an all time high of almost $487,000. The 12-month gain in average price for the two suburbs we're invested has dropped back to around 7.8%, slightly above the long term average of about 6%. The first tranche of this year's rent increase has now come into effect, but the rent rise has been more than offset my the rise in standard variable loan interest rates.

Although interest rate rises are painful in the short term, if rates drop back again in a couple of years time we'll actually be better off - inflation tends to push up real estate prices (due to increased construction costs for new homes, which tends to flow on to existing home prices) whereas the amount of home loan debt stays constant. If wages also rise in line with inflation, when rates (and monthly repayments) drop back down the loan repayments will then be consuming a smaller part of our wage income.

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