As 2014 draws to a close, let’s take a rear vision look at how the year panned out for our financial wellbeing.
Residential property once again stole the investment limelight this year with CoreLogic (formerly RP Data) saying capital city home values have been rising for the past 29 months. Sydney and Melbourne were the stand-out performers with values rising 13.1% and 8.9% respectively in 2014.
Highlighting the meteoric path of Sydney’s property market, at the start of 2012 the city’s median house price was $535,000 – today that figure is $792,000. It makes Sydney our priciest city for residential property, far outstripping nearest rival Melbourne where the median house price is $615,000.
In other state capitals property price growth in 2014 was more subdued, though still positive, ranging from 5.6% in Brisbane to 0.9% in Canberra.
Our retirement savings have also notched up healthy returns in 2014 with ‘balanced’ super funds achieving gains of 8.5% over the 12 months to the end of October. Funds with ‘high growth’ investment options, that have a greater concentration of sharemarket investments, did even better, delivering an average annual gain of almost 10%.
The picture isn’t so great for investors with a strong preference for cash. It is possible to earn 4.0% or more on savings accounts offered by the likes of ME Bank, UBank and ING DIRECT but with inflation running at 2.3% that’s still only a ‘real’ (after-inflation) return of 1.7%.
If you’ve got money in term deposits chances are you’re not doing much better – and it could get even worse. While the Reserve Bank has kept the official cash rate on hold since August last year, interest rates on 3, 6 and 12-month fixed term deposits have been falling. Many banks are now paying less than 3% interest on short terms, so if you have a fixed rate deposit coming up for maturity, check that your cash isn’t automatically rolled over into a miserly rate – after tax and inflation you could be going backwards.
If you have a few spare minutes over the festive break, I recommend taking the ‘money health check’ on the government’s MoneySmart website (www.moneysmart.gov.au). It’s a type of calculator that gives you a report on your “money health” and suggests some steps to improve your finances. This online health check is free, and it’s a great starting point to see what you can do to get your finances back in shape for the year ahead. What’s more, you should be able to do it in under 10 minutes, which I reckon is time well invested.
This is my final Making Money column for 2014, and I’d like to wish all my readers a merry and safe Christmas and a financially rewarding New Year.