David Koch reveals money strategies for 2024
- Replies 5
As the pages of the calendar turn over to 2024, economic dealings start to feel like a great game of chess, where strategic moves are made to protect your financial security.
Australian economics guru and former Sunrise host David Koch, who has now moved on to serve as the Economic Director for Compare the Market, is bringing some of his top money tips for 2024.
Koch's economic forecast for 2024 is based on a careful analysis of Australia's current economic performance.
He noted that without the record net overseas immigration level of nearly 500,000 new arrivals, Australia would be in a recession.
'It's certainly keeping the economy in positive territory,' he said.
‘If we didn't have migrants, we'd be in a recession, simple as that.’
'We've got 500,000 new customers in Australia, and that's keeping retail and shops more resilient, putting pressure on rents and house prices.'
AMP Chief Economist Shane Oliver also warned Australians about a potential recession.
He believed that a single decision by the Reserve Bank could trigger this economic downturn. Specifically, if the Reserve Bank decides to raise interest rates once again, it could raise the chance of Australia entering a recession to an alarming 50 per cent.
To combat this financial crisis, Koch shared a few financial insights that we could use for 2024:
Property Investment Tips for 2024
When it comes to property investment, Koch advised considering the more affordable capital city markets of Brisbane, Adelaide, and Perth over Sydney or Melbourne in 2024.
The biggest cities in Australia received the biggest share of overseas immigration, whereas other state capitals have grown their population from interstate migration.
He believed these smaller state capitals are more likely to see capital growth in 2024 due to their affordability and the potential increase in rental yields.
The mid-point house prices for Brisbane, Adelaide, and Perth are at $870,526, $756,989 and $676,910, respectively, according to CoreLogic.
'Sydney and Melbourne look as though they're trending down a bit–it's a time to be careful,' he said.
'You can see auction clearance rates are starting to be a bit softer in Sydney as housing becomes unaffordable.'
'The rental yields in Sydney and Melbourne are still higher than those smaller capital cities, but they're catching up.'
These yields make an investor landlord more attracted to buying land in these areas, as based on the prospect of stronger capital growth and higher rental income to service higher mortgage repayments.
Perth home prices have soared by 13.9 per cent since January, making it Australia's top-performing city market. Despite the RBA’s rising rates, Perth's housing market is doing well.
In October, inflation slowed to 4.9 per cent, but there's concern the Reserve Bank might raise rates again in February if the consumer price index for the December quarter stays high.
‘That will determine interest rates for all of next year,' he said.
The Reserve Bank didn't change interest rates this week.
They had raised rates last month for the 13th time in 18 months, bringing the cash rate to a 12-year high of 4.35 per cent.
These frequent rate hikes, the most aggressive since 1989, are slowing down the economy.
The Reserve Bank predicts a growth of only 1.5 per cent in 2023. In September, the annual growth rate was 2.1 per cent, below the usual long-term average of 3 per cent.
Healthcare Investment Tips for 2024
For those looking to invest in the share market, Koch recommended healthcare stocks like sleep apnea group ResMed or vaccine maker CSL, which are expected to rebound in 2024.
'Not everything will go up all at once like has happened in previous years, but there will be some sectors that will do better than others and particular companies that will do better than others,' he said.
'You've got ResMed, CSL— their shares have been battered this year, and the analysts are saying healthcare may expect a bounce back next year.’
'These are global healthcare companies, the demand for good, world-class healthcare as Asia develops further, that all flows through into our Australian global healthcare.'
Government Bonds Investment Tips for 2024
He also suggested considering government bonds for fixed returns, especially with yields on a 10-year Commonwealth government bond currently at 4.58 per cent, which is above the 4.35 per cent RBA cash rate.
Governments issue bonds when they borrow money, and investors receive an annual return or yields until the maturity date.
Koch said this would be a good time to lock in a higher yield before rates fall.
‘Lock in higher yields now when there's a forecast of interest rates falling into the future,' he said.
'It could be a good way to go because bonds, if you get a good yield and at the top of the interest rate market, you can make capital growth into the future, so it's worth looking at as part of a diversified portfolio.'
If the market expects higher interest rates, yields will rise. And with the January 31 release of December quarter inflation data, it may have a major bearing on the bond market.
'That December quarter inflation figure is just critical to everything,' Koch noted.
'If it comes in below expectations, then bond yields will drop; if it comes above expectations, bond yields will rise.'
The Reserve Bank expects inflation to remain above its two to three per cent target until late 2025. This means interest rates could still rise.
Koch's Views on Older Generation’s Criticism
In the interview, Koch also addressed the ongoing criticism of older generations, particularly when it comes to the property market.
He rejected popular claims that older generations had an easier path to homeownership than young people today.
'This intergenerational war doesn't do anyone any favours,' he said.
'I know when I was younger, I was thinking exactly the same thing about my parents—”Why can't I live their lifestyle now?” and my parents would be saying, “Well, you haven't worked as long as we have”.'
However, Koch did acknowledge that today's variable mortgage rates approaching seven per cent are equivalent to the 17 per cent interest rates of the late 1980s because house prices are much higher compared with incomes.
According to Finder, the average Australian household now needs a minimum wage of $182,000—nearly three times the median income of $65,000 from 2022—to own a house.
Meanwhile, to afford the average Australian apartment, which costs $659,130, the average single-income household would need a salary of almost $130,000.
‘You can make the point that today's home buyers are doing it as tough, if not tougher, than when boomers were paying 17 per cent in the seventies and eighties purely because of the size of the loan.’
Money-Saving Tips for 2024
Koch advised Australians to reconsider automatically renewing their insurance every year and to negotiate a better rate with their lenders if they have proven to be reliable.
'It is a time that you don't automatically renew insurance policies, see if you can get a better deal,' he said.
'It is a time that you ring your lender, or financier on your home loan and say, “I want a discount, and why haven't you given me one up to now?”’
In conclusion, Koch's top money tips for 2024 include investing in property in smaller capital cities, considering healthcare stocks and government bonds, and being proactive in seeking better deals on insurance and home loans. His views on the criticism of older generations highlight the need for a more nuanced understanding of the challenges faced by different generations in the property market.
What are your thoughts on Koch's financial advice for 2024? Do you agree with his views on the criticism of older generations? Share your thoughts in the comments below.
Australian economics guru and former Sunrise host David Koch, who has now moved on to serve as the Economic Director for Compare the Market, is bringing some of his top money tips for 2024.
Koch's economic forecast for 2024 is based on a careful analysis of Australia's current economic performance.
He noted that without the record net overseas immigration level of nearly 500,000 new arrivals, Australia would be in a recession.
David Koch shared some of his best money tips for 2024. Credit: @kochie_online / Instagram
'It's certainly keeping the economy in positive territory,' he said.
‘If we didn't have migrants, we'd be in a recession, simple as that.’
'We've got 500,000 new customers in Australia, and that's keeping retail and shops more resilient, putting pressure on rents and house prices.'
AMP Chief Economist Shane Oliver also warned Australians about a potential recession.
He believed that a single decision by the Reserve Bank could trigger this economic downturn. Specifically, if the Reserve Bank decides to raise interest rates once again, it could raise the chance of Australia entering a recession to an alarming 50 per cent.
To combat this financial crisis, Koch shared a few financial insights that we could use for 2024:
Property Investment Tips for 2024
When it comes to property investment, Koch advised considering the more affordable capital city markets of Brisbane, Adelaide, and Perth over Sydney or Melbourne in 2024.
The biggest cities in Australia received the biggest share of overseas immigration, whereas other state capitals have grown their population from interstate migration.
He believed these smaller state capitals are more likely to see capital growth in 2024 due to their affordability and the potential increase in rental yields.
The mid-point house prices for Brisbane, Adelaide, and Perth are at $870,526, $756,989 and $676,910, respectively, according to CoreLogic.
'Sydney and Melbourne look as though they're trending down a bit–it's a time to be careful,' he said.
'You can see auction clearance rates are starting to be a bit softer in Sydney as housing becomes unaffordable.'
'The rental yields in Sydney and Melbourne are still higher than those smaller capital cities, but they're catching up.'
These yields make an investor landlord more attracted to buying land in these areas, as based on the prospect of stronger capital growth and higher rental income to service higher mortgage repayments.
Perth home prices have soared by 13.9 per cent since January, making it Australia's top-performing city market. Despite the RBA’s rising rates, Perth's housing market is doing well.
In October, inflation slowed to 4.9 per cent, but there's concern the Reserve Bank might raise rates again in February if the consumer price index for the December quarter stays high.
‘That will determine interest rates for all of next year,' he said.
The Reserve Bank didn't change interest rates this week.
They had raised rates last month for the 13th time in 18 months, bringing the cash rate to a 12-year high of 4.35 per cent.
These frequent rate hikes, the most aggressive since 1989, are slowing down the economy.
The Reserve Bank predicts a growth of only 1.5 per cent in 2023. In September, the annual growth rate was 2.1 per cent, below the usual long-term average of 3 per cent.
Healthcare Investment Tips for 2024
For those looking to invest in the share market, Koch recommended healthcare stocks like sleep apnea group ResMed or vaccine maker CSL, which are expected to rebound in 2024.
'Not everything will go up all at once like has happened in previous years, but there will be some sectors that will do better than others and particular companies that will do better than others,' he said.
'You've got ResMed, CSL— their shares have been battered this year, and the analysts are saying healthcare may expect a bounce back next year.’
'These are global healthcare companies, the demand for good, world-class healthcare as Asia develops further, that all flows through into our Australian global healthcare.'
It is ideal to invest in stocks that have good or fixed returns. Credit: Unsplash
Government Bonds Investment Tips for 2024
He also suggested considering government bonds for fixed returns, especially with yields on a 10-year Commonwealth government bond currently at 4.58 per cent, which is above the 4.35 per cent RBA cash rate.
Governments issue bonds when they borrow money, and investors receive an annual return or yields until the maturity date.
Koch said this would be a good time to lock in a higher yield before rates fall.
‘Lock in higher yields now when there's a forecast of interest rates falling into the future,' he said.
'It could be a good way to go because bonds, if you get a good yield and at the top of the interest rate market, you can make capital growth into the future, so it's worth looking at as part of a diversified portfolio.'
If the market expects higher interest rates, yields will rise. And with the January 31 release of December quarter inflation data, it may have a major bearing on the bond market.
'That December quarter inflation figure is just critical to everything,' Koch noted.
'If it comes in below expectations, then bond yields will drop; if it comes above expectations, bond yields will rise.'
The Reserve Bank expects inflation to remain above its two to three per cent target until late 2025. This means interest rates could still rise.
Koch's Views on Older Generation’s Criticism
In the interview, Koch also addressed the ongoing criticism of older generations, particularly when it comes to the property market.
He rejected popular claims that older generations had an easier path to homeownership than young people today.
'This intergenerational war doesn't do anyone any favours,' he said.
'I know when I was younger, I was thinking exactly the same thing about my parents—”Why can't I live their lifestyle now?” and my parents would be saying, “Well, you haven't worked as long as we have”.'
However, Koch did acknowledge that today's variable mortgage rates approaching seven per cent are equivalent to the 17 per cent interest rates of the late 1980s because house prices are much higher compared with incomes.
According to Finder, the average Australian household now needs a minimum wage of $182,000—nearly three times the median income of $65,000 from 2022—to own a house.
Meanwhile, to afford the average Australian apartment, which costs $659,130, the average single-income household would need a salary of almost $130,000.
‘You can make the point that today's home buyers are doing it as tough, if not tougher, than when boomers were paying 17 per cent in the seventies and eighties purely because of the size of the loan.’
Money-Saving Tips for 2024
Koch advised Australians to reconsider automatically renewing their insurance every year and to negotiate a better rate with their lenders if they have proven to be reliable.
'It is a time that you don't automatically renew insurance policies, see if you can get a better deal,' he said.
'It is a time that you ring your lender, or financier on your home loan and say, “I want a discount, and why haven't you given me one up to now?”’
In conclusion, Koch's top money tips for 2024 include investing in property in smaller capital cities, considering healthcare stocks and government bonds, and being proactive in seeking better deals on insurance and home loans. His views on the criticism of older generations highlight the need for a more nuanced understanding of the challenges faced by different generations in the property market.
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