Trading Update
As we approach the end of October, it’s a good time to look back at September, a month marked by steady employment figures and shifts in economic indicators that could shape the coming months.
Last week’s unemployment data remained steady at 4.1% for September, but the participation rate hit a record high of 67.2%. With this strong labour market, most economists now expect the Reserve Bank of Australia is unlikely to lower interest rates until early next year.
Interestingly, the CBA Household Spending Insights (HSI) Index declined by 0.7% in September, indicating a notable slowdown in consumer spending. The index, which tracks 30% of consumer transactions nationwide, was up 1.6% in August but dropped on an annualised basis from 3.7% in August to 2.1% in September.
Many advanced economies, including the US, have already cut rates. Although the RBA didn’t raise rates to the same extent as other countries, Australian mortgage rates are still higher than in many overseas markets, particularly in the UK and Canada, and are in line with those in New Zealand, which has also cut rates.
While the steady unemployment rate makes it more difficult for the RBA to reduce official rates at its November or December meetings, there is still, in our view, a strong chance that the September quarter CPI will be softer than expected, which could put rate cuts back on the agenda for both meetings before the year ends.
The rate of growth in residential property prices across the country is also easing, as the supply of listings increases. While some economists argue we are entering a buyer’s market, we expect this trend to be short-lived. The official cash rate is likely to be closer to 3% than 4% by this time next year, and the rise in listings may partly be driven by the longer-than-expected timeline for the RBA to lower rates.
ABS data for total dwelling approvals, released earlier this month for August, showed a 6.1% decline, down to 13,991 approvals—well below what’s needed to meet demand and far short of the government’s target of 20,000 new homes per month over the next five years.
As a result, the structural undersupply of housing across the country is unlikely to improve anytime soon. While growth in property price growth may stall until rates decrease, we believe the market will remain well-supported as we head into 2025.
ASCF Current Targeted Distribution Rates
ASCF High Yield Fund
3 Months | 6 Months | 12 Months | 24 Months |
---|---|---|---|
6.50% | 7.25% | 7.75% | 7.30% |
ASCF Select Income Fund
3 Months | 6 Months | 12 Months | 24 Months |
---|---|---|---|
6.25% | 6.75% | 7.25% | 6.75% |
ASCF Premium Capital Fund
6 Months | 12 Months | 18 Months | 24 Months |
---|---|---|---|
6.10% | 6.25% | 6.75% | 6.30% |
ASCF Private Fund
3 Months | 6 Months | 12 Months | 24 Months |
---|---|---|---|
8.19% | 8.39% | 8.59% | 8.49% |
Monthly Managed Fund Cumulative Growth & Performance
Managed Funds Under Management
as at 30th of September 2024
September 2024 | |
---|---|
ASCF High Yield Fund | $146,291,862.44 |
ASCF Select Income Fund | $48,726,750.22 |
ASCF Premium Capital Fund | $23,529,023.53 |
Combined Funds under Management | $218,547,636.19 |
In September, loans and inquiry levels were steady, with $6,034,000.00 in new loan originations settled.
The unit price across all three of our retail funds remains stable at $1.00 per unit.
All monthly distributions have been paid in full for the month of September.
Lending Activity Update
Quarterly Loan Settlements
as at 30th of September 2024
Current Loans by Fund Source
as at 30th of September 2024
High Yield Fund | Select Income Fund | Premium Capital Fund | |
---|---|---|---|
1st Mortgage Loans | 78.27% | 100% | 100% |
2nd Mortgage Loans | 15.05% | 0% | 0% |
1st & 2nd Mortgage Loans | 6.69% | 0% | 0% |
Avg. Weighted LVR | 50.30% | 46.22% | 38.64% |
Avg. Loan Size | $1,423,933.31 | $916,303.99 | $814,105.26 |
Current Loans Geography
as at 30th of September 2024
Why Invest with ASCF?
If you’ve been considering investing with ASCF, now might be a great time. With economists signalling the likelihood of the Reserve Bank of Australia cutting interest rates by February 2025, several key factors make this an opportune moment to invest.
Although there has been mention of the RBA dropping rates for some time, there is now a stronger feeling we are getting to that point.
When interest rates are dropping, variable-rate investments can create uncertainty. Our pooled mortgage funds, however, offer set targeted rates for the term chosen. This provides a sense of security—you have confidence in what your income will be, regardless of how the market fluctuates. While other investors might face reduced returns as variable rates decline, you’ll enjoy the peace of mind that comes with targeted, consistent payments.
As interest rates fall, traditional variable rate investments typically reduce their rates accordingly. Our pooled mortgage funds provide an attractive alternative, offering higher yields than most variable options. By locking in a competitive target rate now, you’ll likely outperform variable rate products if interest rates drop during the term of your investment.
Whilst an investment in our fund is not a bank term deposit and past performance is not indicative of future performance, we believe our track record over the past 8 years speaks for itself.
Interested in learning more?
If you have been considering investing in one of our funds or making an additional investment, please reach out to Nick Alcock on 0459 835 335 or email at [email protected]
An Interesting Transaction
Problem:
A young family with three children were living in a small two-bedroom unit in inner-city Sydney and needed to purchased a new property to accomodate their growing needs.
Solution:
ASCF provided the family with a bridging loan across both properties, allowing them to secure the purchase of their new house. The unit was listed on the market within a week of them moving out.
ASCF provided a total loan of $1,069,500 across the two properties on a four-month term at a rate of 13.75% per annum and peak LVR of 54.71%.
What ASCF Does Differently:
ASCF is able to provide bridging loans to borrowers for short term needs which traditional lenders avoid due to the short term nature of the loan.
Market Update
For the 20th consecutive month, headline national home values increased by a modest 0.4%, signalling that the strong momentum is beginning to leave the market. This is demonstrated by housing values rising just 1% for the September quarter, the lowest over a rolling three-month period since March 2023. Perth continues to be the strongest performer, growing by 1.6% for the month, followed by Adelaide and Brisbane with increases of 1.3% and 0.9%, respectively. Sydney and Darwin were the only other markets to see increases, rising by 0.2% and 0.1% for the month, while Melbourne, Canberra, and Hobart all saw housing values ease, with decreases of 0.1%, 0.3%, and 0.4%, respectively.
Property Values
as at 30th of September 2024
Median Dwelling Values
as at 30th of September 2024
Quick Insights
Rate hold slows buyers, but investor confidence remains strong
Profits from home sales nationwide climbed to a record high of $285,000 on average in the June quarter.
The RBA’s decision to keep interest rates steady has left many homebuyers waiting, as borrowing power remains limited. While a future rate cut is anticipated, it won’t significantly boost demand until it happens. Meanwhile, investors are showing renewed interest, particularly in Melbourne, where the market is stabilising despite an increase in listings. A rate cut could lead to a faster recovery than expected.
Source: Australian Financial Review
Australia’s housing market soars to record $11 trillion
Australia’s housing market hit a record $11 trillion in September, with home values rising 6.7% over the past year, adding $900 billion in wealth.
Despite higher interest rates, new listings and strong investor activity continue to drive the market. Over the past decade, house prices surged by 85.9% nationwide, with suburbs in Sydney, Brisbane, and Melbourne leading long-term growth.
While price growth is expected to slow, strong demand and new housing developments will continue to support the market.
Source: Australian Financial Review