UK Property Market – March 2010 Update

I am still yet to buy myself a flat or house even though the ownership of one is important to my retirement investing strategy in the longer term. As I mentioned last month I have now also even stopped looking on the internet at house prices in the area that I am interested as I still think that UK house prices are still overvalued by a huge margin. Today the Nationwide reported that average house prices had risen from £161,320 to £164,519, a monthly rise of £3,199 or 2.0%. On an annualised basis house prices in absolute terms are up by 9.0% and if I look at real (after inflation) returns they are still up by 4.5%. When you live in a society where average assets are increasing at £3,199 per month I ask myself why go to work. Why not just leverage up, buy a few buy to lets and sit at home using your house price increases as a cash machine [sic].

Australian house price anecdotal

My dataset for Logan City which is just south of Brisbane shows that over the last 3 months house prices have risen 4.6% in this part of the world. This seems outrageous to me given the credit crunch that the world has just been through. However I now have a story that I wouldn’t have believed if somebody had told me but that demonstrates just how crazy the property market still is in this part of the world.

UK Inflation – March 2010 Update

The Office for National Statistics has reported the February 2010 UK Consumer Price Index (CPI) as 3.0% down from 3.5% and the UK Retail Price Index (RPI) as 3.7% which is identical to last month.

My first chart is tracking the CHAW Index which is the RPI including All Items. I focus on the RPI as my National Savings and Investments Index Linked Savings Certificates use the RPI to index from. The current level of the Index remains above the trend line and now appears to be diverging further from trend.

Investing to minimise fees and taxes

Two key elements of my retirement investing strategy are to minimise fees and taxes. This is due to the fact that small changes in annual returns make large differences when compound interest works its magic over many years. Fees and taxes greatly affect those annual returns. For example if I invest a lump sum of £1,000 and achieve an annual investment return of 6% over 30 years I will end up with £5,743. Change that return to 6.5% and I achieve £6,614. So by saving 0.5% annually, which is easily done for most people in my opinion, you can end up with an additional 15% in your pocket. Not bad for taking an active interest in your own investment portfolio and doing a little shopping around and research.

US Consumer Price Index (CPI) Inflation – March 2010 Update

The above chart shows the US Consumer Price Index (CPI-U) to February 2010 courtesy of the US Bureau of Labor Statistics. Year on year US CPI inflation has fallen from 2.6% in January ’10 to 2.1% in February ‘10. Annualising the last 3 months and inflation is running at 0.8% and annualising the last 6 months has inflation at 0.8% also. It looks like the US continues to have their deflation ‘problems’ under control for now.