I thought I would dig up my forecast from earlier this year to see what portion of it has come true......
Here it is:
http://www.somersoft.com/forums/showthread.php?p=666564#post666564
My comments are:
1. We are not at the end of the interest cycle yet....I am of the view that there is another 0.5% to 0.75% in increases. This means that rates have will have rised between 50%-60% by the end of 2010. This will hurt because it is more than the rise from 6.8% to 9% in percentage terms, where is increased about 33%. Rates have increased by about 0.35-0.5%...and possibly more to come
2. The recent attempts by China to cool growth and the risk of this being overdone and the recent tax increases on Mining companies are potential risks to one of the key areas of the Australian economy. Some evidence of China tightening credit but no impact on mining yet
3. Credit will get tighter....as I suspect what is happening with the PIIGS (Portugal, Ireland, Iceland, Greece, and Spain) will reverberate through the financial markets. Watch this space...Greece is going to be minor impact compared to what will happen if Spain does not sort their economy out. Well Iceland, Greece and Ireland done like dinner....Portugal probably next but the elephant in the room is Spain which is Europe's 4th or 5th largest Economy
4. Being an election year....and politicians being predictable will make immgration and issue and rein this in from the current 300k to 150-180k. This will have an impact on housing. This has been done on the quite via tightening of the skills criteria and 457 visas....but the real impact maybe due to the stronger dollar which has made Aussie property more expensive
5. The building approvals are increasingly rapidly....though Qld and NSW will continue to experience supply constrainsts even if immigration is reduced. Building back down overall....but NSW has has more building but Qld has definitely slowed due to reduced interstate migration
6. Some FHB are realising their first home dream is starting to become a nightmare....who would have predicted?? Yep....already NSW paper articles are stating this
So what does this mean?:
1. Interest rates will top at somewhere between 7.8% and 8.5% late in 2010. Given the level of indebtness of people, this will not stay at these levels for long....and by May 2011 we will see a downward movement as things really cool in real estate. Std variable is already 7.8%....maybe it might be the top if current GDP figures are a precursor
2. The riskiest markets will be Vic (Melbourne) as it has boomed a lot followed by Brisbane and Perth due their exposure to the Mining sector. Sydney/NSW can also be risky....but due to the shortfall there maybe a floor there. The real dark horse is what will happen with immigration and if it becomes an election issue? Vic auctions have slowed considerably...the Qld and Perth markets are basket cases. For that matter even SA is down. Will need further data to confirm the direction of Canberra and Sydney markets though early indications are these markets are slowing also
3. The tightening of credit will also rein in the market and even more so if the PIIG issues affects the financing side of things. Should China waver....it buckle up! Don't I know it ....banks want your first born..will it change shortly is the question....
What will I be doing?
1. I have decided to hold off on purchases...as I suspect there will be some opportunities which will present when the FHB sell up as they realise mortgages can be bummer...and sales due to bankruptcies are another possibility. Some evidence of this already...should see more in Jan to May period as IR increases bite
2. If the supply side is constrained I will pushing rents up possibly 10-20% per annum. The potential for this exists mostly in Qld and NSW. I can increase rents in SA and NSW...Vic is okay but Qld rents are stable or going backwards
3. Will continue to identify areas around Australia which will be unaffected by any of this. Still working on this. Some areas due to Mortgage stress or Infrastructure upgrades are looking promising
4. I seem to be in a solid position from a borrowing perspective as I have up to $2m to spend. Though I don't like the thought of putting down a 10% deposit! Well...if I can get over the hurdles the lenders are putting down...then I am sweet.....also early indications some 95-97% lends are back
Would love to hear commentary on my thoughts above??
Here it is:
http://www.somersoft.com/forums/showthread.php?p=666564#post666564
My comments are:
1. We are not at the end of the interest cycle yet....I am of the view that there is another 0.5% to 0.75% in increases. This means that rates have will have rised between 50%-60% by the end of 2010. This will hurt because it is more than the rise from 6.8% to 9% in percentage terms, where is increased about 33%. Rates have increased by about 0.35-0.5%...and possibly more to come
2. The recent attempts by China to cool growth and the risk of this being overdone and the recent tax increases on Mining companies are potential risks to one of the key areas of the Australian economy. Some evidence of China tightening credit but no impact on mining yet
3. Credit will get tighter....as I suspect what is happening with the PIIGS (Portugal, Ireland, Iceland, Greece, and Spain) will reverberate through the financial markets. Watch this space...Greece is going to be minor impact compared to what will happen if Spain does not sort their economy out. Well Iceland, Greece and Ireland done like dinner....Portugal probably next but the elephant in the room is Spain which is Europe's 4th or 5th largest Economy
4. Being an election year....and politicians being predictable will make immgration and issue and rein this in from the current 300k to 150-180k. This will have an impact on housing. This has been done on the quite via tightening of the skills criteria and 457 visas....but the real impact maybe due to the stronger dollar which has made Aussie property more expensive
5. The building approvals are increasingly rapidly....though Qld and NSW will continue to experience supply constrainsts even if immigration is reduced. Building back down overall....but NSW has has more building but Qld has definitely slowed due to reduced interstate migration
6. Some FHB are realising their first home dream is starting to become a nightmare....who would have predicted?? Yep....already NSW paper articles are stating this
So what does this mean?:
1. Interest rates will top at somewhere between 7.8% and 8.5% late in 2010. Given the level of indebtness of people, this will not stay at these levels for long....and by May 2011 we will see a downward movement as things really cool in real estate. Std variable is already 7.8%....maybe it might be the top if current GDP figures are a precursor
2. The riskiest markets will be Vic (Melbourne) as it has boomed a lot followed by Brisbane and Perth due their exposure to the Mining sector. Sydney/NSW can also be risky....but due to the shortfall there maybe a floor there. The real dark horse is what will happen with immigration and if it becomes an election issue? Vic auctions have slowed considerably...the Qld and Perth markets are basket cases. For that matter even SA is down. Will need further data to confirm the direction of Canberra and Sydney markets though early indications are these markets are slowing also
3. The tightening of credit will also rein in the market and even more so if the PIIG issues affects the financing side of things. Should China waver....it buckle up! Don't I know it ....banks want your first born..will it change shortly is the question....
What will I be doing?
1. I have decided to hold off on purchases...as I suspect there will be some opportunities which will present when the FHB sell up as they realise mortgages can be bummer...and sales due to bankruptcies are another possibility. Some evidence of this already...should see more in Jan to May period as IR increases bite
2. If the supply side is constrained I will pushing rents up possibly 10-20% per annum. The potential for this exists mostly in Qld and NSW. I can increase rents in SA and NSW...Vic is okay but Qld rents are stable or going backwards
3. Will continue to identify areas around Australia which will be unaffected by any of this. Still working on this. Some areas due to Mortgage stress or Infrastructure upgrades are looking promising
4. I seem to be in a solid position from a borrowing perspective as I have up to $2m to spend. Though I don't like the thought of putting down a 10% deposit! Well...if I can get over the hurdles the lenders are putting down...then I am sweet.....also early indications some 95-97% lends are back
Would love to hear commentary on my thoughts above??
