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The latest happenings in the Melbourne property market. For our Essays and The Secret Agent Report, see our Research page.


Category Archives For: Interest Rates

Rates stay

Rates are on hold as mixed economic data settles the RBA from making any movements.

The RBA could be using the threat of raising rates as a ‘good enough’ deterrent to settle certain parts of the economy.  We are living in interesting times and the true realisation of a ‘two speed’ economy are playing out.

Every shop owner I talk to seems to be struggling while for most in the mining sector,  it’s happy days.

Concern of a heated property market are now starting to weaken as the market cools.  It would be a bold move that’s for sure if the RBA made upward adjustments over the next few months.

Full statement can be found here.


Growing concern on an interest rate hike

Many conflicting views are floating around at the moment concerning interest rates. Will we see a rise in June? Or will the RBA leave it as is?

It seems the concern surrounding the issue has grown, with weaker than expected construction figures for the Mark quarter. Total construction work over Australia rose 0.7% – half that of the forecasted rise of 1.5%. Economists are predicting that these bleak figures plus the worry of affordability of a rate rise will make a hike in June unlikely.

Our prediction is that rates will be on hold for now.  We don’t feel that the reserve bank will risk the
potential pain just yet for fear that it might do more harm than good.


Interest Rates remain steady

The Reserve Bank has elected to leave interest rates unchanged, remaining at 4.75.

RBA governor Glenn Stevens attributed the rate decision to low inflation, an increase in private investment and on going consumer spending.

Then RBA has raised the cash rate seven times since 2009, the last rise being in November last year – an effort to calm the economy.

You can read the official statement from the RBA here.


The cost of money; an important issue for the start of 2011

This is a rather large topic for this year.  The perception issues that interest rates stir in this country is staggering.

Much of the money that the actual banks lend comes from overseas rather than locally.  Over the past few months troubles have been brewing in Europe were much of this ‘sourced money’ comes from.

The rising cost of obtaining money overseas could mean that banks will be again forced to raise their ‘market rate’ to much of the market.  This is even if no movement happens from the reserve bank level.

Small movements shouldn’t hurt the market.  Perception is another matter!  If the majority of the market feel that this will be an issue,  then a self fulfilling prophecy could be in the making.

The sense so far for 2011 has actually been pretty good.  We are still very much in the early days of the 2011 property market.  I’ve been somewhat surprised of the early interest that has evolved already .  It’s better than I expected and stock levels haven’t  seemed to be expanding as we thought they might at the later part of last year.

Late February and March auctions should be interesting.  Our first hope for the start of 2011 is that stock quality will be sufficient.  As vendors and agents come back from holidays,  we should find this out pretty quickly.


Further Interest Rate Pain in 2011

The chief executive of the CBA warned that interest rates would rise by 1% next year and suggested that the cost of global borrowing would not peak until 2012.  Bad news for people wanting to get into the property market.

If this is the case the property market could be in for a bumpy ride 2011, given that the end of this year has not ended the way most were hoping for. Bids at Auction have been greatly reduced, partly due to the interest rate rise in November.

If rates do increase and all the data suggests this will be the case, property investors should see a increase in rental returns.  As more people will be refraining from buying as borrowing will not be an option and instead will be entering the rental market.


Interest Rates Hold

Good news for everyone with a mortgage, as the RBA holds its Interest Rates for the month of December.  Now we just need to wait and see if the banks do the same.

No doubt plenty of pressure has been placed on the RBA not increase rates at this time of the year when consumers are extremely cautious with their spending. We have already seen many retailers launching pre Christmas sales so as to encourage spending which has been lacking for most of the year. Retailers will certainly be glad of the RBA’s decision.

With so much uncertaintly in the rest of the world, the US still struggling, Ireland receiving massive assistance from the EU while Spain, Portugal, Belgium and Greece all on the brink of disaster, we in Australia have come out of the GFC relitaivley unscathed. We are still able to borrow from the banks without the difficulties that are faced in the UK and our housing market is very strong.

2011 will be a year to watch with interest. Buyers are still asking us when prices will fall dramatically, unfortunately we can not see this happening. Many people are looking for the drop in the market and a return of prices 5 years ago, we need to look forward rather than back. We can’t keep hoping of prices drops, as all we are likely to see in the short to medium term is for prices to hold and there is no reason why we can not see them strengthen.


Interest rates – Opportunity or threat?

It’s an interesting question that we come across with great regularity.

How will interest rates impact the market for property buyers and is this an opportunity or a threat?

As a property buyer, it’d be fair to say that as rates go up, your opportunities increase providing you are in a solid cash position.

I like to refer to interest rates as a ‘barrier of entry’. As the barrier increases, the competition decreases. This is a good thing for property buyers in a stronger financial position and are less exposed to fluctuating interest rates.
Now there are exceptions here. Interest rate movements in the upward direction will slow down new development which in turn will mean an even shorter supply of property in the future. This can then fuel pricing yet again.

So many factors always exist. However for the short term I think this is an opportunity rather than a threat. Extreme tight vacancy rates will also mean rising yields moving forward. A good thing for investors.

As people start to turn to the rental market, the most likely scenario will be rising rents.


Interest Rate Rise : Greedy Banks or Profitable Business?

As we have all seen the CBA has increased its Interest Rates over and above that of the Reserve Bank.  This has caused outrage from mortgage holders, many of whom will be struggling to cope with another interest rate rise.  At the same time the Banks are announcing record breaking profits, which shareholders will be ecstatic about.  The Bank is a business and to ensure a profit, but at what cost to their customers.

The Federal Government is looking into what can be done to restrict the banks ability to increase rates, this will be an interesting time for borrowers and the country.  We don’t want to be in a position where the banks are not lending as this will reduce confidence in the market.  Hopefully the CBA rise will cause a shake up in banking sector, borrowers have been dictated to for many years and perhaps the banks should look at keeping their customers as happy as their shareholders.

We always advise our clients to look carefully at their finances, look ahead and factor into your borrowing interest rate rises.


Interest rates staying fixed

It was a pretty uneventful meeting with the RBA leaving rates on hold as expected as its statement of the outcome of the meeting (find here) not really reporting much.

China’s growth has moderated, this was about the only real take away here. The economy seems to be upbeat.