RBA To Raise Rates 3 More Times, Says ANZ
- Thread starter Ajax
- Start date
Rates will go up for sure. We are entering a period of inflationary expectations.
The significance of that will be lost on those who weren't in biz in the '80's. Then, you would get a new supplier's price list every few months. When you asked why the increase, you were given a shrug and told "But we haven't had a price rise for X months."
Anyone else seeing this now? Geoff?
Edit: The seeds have been sown and have germinated. Don't blame Labor next year when it becomes obvious, and I won't blame the Libs too much either because it is really a worldwide folly of our central banks.
The significance of that will be lost on those who weren't in biz in the '80's. Then, you would get a new supplier's price list every few months. When you asked why the increase, you were given a shrug and told "But we haven't had a price rise for X months."
Anyone else seeing this now? Geoff?
Edit: The seeds have been sown and have germinated. Don't blame Labor next year when it becomes obvious, and I won't blame the Libs too much either because it is really a worldwide folly of our central banks.
Hi everyone..
I would like to ask people of their opinions..
suppose you had a crystal ball and that the report of 3 interest rises happened exactly as predicted.....
For people like me who are trying to get IP#1 but are finding that auction prices (using the auctions to get a feel of the market and not to buy at auction) are skyrocketing in most areas....
would it be recommended or a good strategy to wait until say the first or second of these rates hit, vendors may adjust their high expectations, buyers may become more conservative in bidding at auctions or offers for private sales., so that we may get a realistic chance of getting IP#1
I understand that if you are in it for long term, it doesn't really matter, but if I could get a property say selling for $350k today in the mad rush, for $325 in Dec or Jan when its more quiet, thats quite a bit of a saving......
I know $25 to most with many IPs may not mean much but for a first timer and a RELATIVE young person, its still quite a bit of $$$$......
I would like to hear opinions please.
I would like to ask people of their opinions..
suppose you had a crystal ball and that the report of 3 interest rises happened exactly as predicted.....
For people like me who are trying to get IP#1 but are finding that auction prices (using the auctions to get a feel of the market and not to buy at auction) are skyrocketing in most areas....
would it be recommended or a good strategy to wait until say the first or second of these rates hit, vendors may adjust their high expectations, buyers may become more conservative in bidding at auctions or offers for private sales., so that we may get a realistic chance of getting IP#1
I understand that if you are in it for long term, it doesn't really matter, but if I could get a property say selling for $350k today in the mad rush, for $325 in Dec or Jan when its more quiet, thats quite a bit of a saving......
I know $25 to most with many IPs may not mean much but for a first timer and a RELATIVE young person, its still quite a bit of $$$$......
I would like to hear opinions please.
No! They are going up in part because inflation is going up. Look at nurses - they just got a CPI+ rise for next 5 years, according to The Age. similarly others in public sector jobs are getting big rises. Even if property follows inflation in notional terms it will rise. As for real terms - different story.
I'm not sure if waiting for the sky to fall down is a good strategy before making the plunge into property. We have been in a tightening environment for over 5 years now. And since then property prices have continued to rise in all capital cities and more than double for some beachfront properties. I think there are other factors at play here. You can certainly buy mortgaged stressed homes now. There are a lot of areas where m'gee sales are higher than normal levels but are those the areas you want to invest? or in those that have consistently outperformed in the last 10 years? Unfortunately those affluent areas are immune to rate hikes. IMO, rate hikes do not really affect investors. Most prudent investors would have had part of their positions hedged with fixed rates and at the same time, would've seen massive rent increases through their portfolios. Sux if you're on the sidelines or a first home buyer but thats the reality of whats going on I'm afraid.
My strategy is to invest in bottom-end market for the time being, and if crash really occurs, I'll be targeting inner suburb areas bought by young people with high income and with high leverage. These areas usually attract unusually high rent, so if the economic goes bad, these people will suffer from two fronts. 1st, they are likely to be retrenched (especially in financial industry), and 2ndly, they will have to lower their rental expectation as nobody will be able to afford above average rental. Obvious suburbs like Double Bay or Toorak will be immuned to this, but there are a lot of other "blue chip" areas which are mainly purchased by people from this group, and will suffer badly from downturn.
I wouldn't worry about CPI.
Have a look at the increased money supply in Australia.
http://www.economist.com/markets/in...ory_id=9995449&CFID=23382827&CFTOKEN=59019974
This is the real inflation rate.
Have a look at the increased money supply in Australia.
http://www.economist.com/markets/in...ory_id=9995449&CFID=23382827&CFTOKEN=59019974
This is the real inflation rate.
I don't think waiting is such a good idea, ESPECIALLY if it's your first one. Why? The longer you look and the longer you think about it, the harder it is to pull the trigger. You'll see a house, think 'hey, this one isn't as good as the other one which I missed out on' and keep looking and waiting.
In other words, if you keep waiting for the bottom you'll end up buying less, if anything at all.
My strategy has always been to buy cheap and buy regularly. So in this case, I'll buy according to my plan: PPOR as soon as I find an appropriate one (I'm not thinking about whether the market will drop, though I will be using a bank valuation as a guideline), then regular IPs.
Alex
In other words, if you keep waiting for the bottom you'll end up buying less, if anything at all.
My strategy has always been to buy cheap and buy regularly. So in this case, I'll buy according to my plan: PPOR as soon as I find an appropriate one (I'm not thinking about whether the market will drop, though I will be using a bank valuation as a guideline), then regular IPs.
Alex
Here comes the outer suburb mortgage distress.....
3 rate rises means another $85pm of pre-tax income in Brissy for a median priced home.
My strategy of creating dwellings for 2-3 generations under one roof has been waiting for this..... let's rock and roll.
3 rate rises means another $85pm of pre-tax income in Brissy for a median priced home.
My strategy of creating dwellings for 2-3 generations under one roof has been waiting for this..... let's rock and roll.
Yes, and what if you're wrong? What if instead of prices falling the market just stagnates as supply dries up? In that situation you may not get to buy the one discounted to $325k. The media has been hanging on every rate rise saying that this is the straw that will break the camel's back, but prices have largely held (heck, look at Melbourne and Brisbane!)
So while a $25k saving is decent, you have to ask yourself, with no experience with property are you likely to be able to buy at that discount? Would you rather buy a property at $350k now, watch it fall to $325k and then go up in later years, or miss out on a 'bargain' $325k, and THEN watch it go up?
Alex
I have seen a little of this- but not as much as I had expected. The drought is the big influence on prices in my business, but price rises have been small and infrequent. But then, Subway nationally keep a very tight control on prices from our suppliers.
What I am seeing, which has been quite unexpected, is a strong increase in sales over the last two months, over and above seasonal factors. This appears to be reflected elsewhere in the state.
Guys im watching this to and throw with interest. Speculating on future price movements is difficult at the best of times.
At the end of the day i think there are two major solutions:
1) If you currently hold property, then consider the COST of both selling and rebuying at a future point in time.
2) if you are looking to buy, just ask yourself are you comfortable with the repayments (and assumming interest rates go up by a full 2% on current levels).
One of warren buffets best principles is the belief that when he buys an investment he is quite happy for the pricing mechanism (in his case the stock market) to close for the next 10 years. ie he looks at the price and fundamentals at the time of purchases and then forgets about it.
At the end of the day i think there are two major solutions:
1) If you currently hold property, then consider the COST of both selling and rebuying at a future point in time.
2) if you are looking to buy, just ask yourself are you comfortable with the repayments (and assumming interest rates go up by a full 2% on current levels).
One of warren buffets best principles is the belief that when he buys an investment he is quite happy for the pricing mechanism (in his case the stock market) to close for the next 10 years. ie he looks at the price and fundamentals at the time of purchases and then forgets about it.
There's your first mistake; why are you trying to buy at auctions? You're just competing with the emotional O/O's who will push the price up to market value.
By the second rate rise the cheque books will have mothballs in them for most. That's when it's time to get out yours I reckon.
Yup ..
Inflation has only being subdued in the West due to the phenomena that is China .. It took many 'decades' to control inflation since the 1970s... US is totally dis-regarding this opting to boost their Economy and face inflation..
P.S if you read what I have writtten, I am using the auctions to educate myself on the valuing process and to get a feel for the entire market, I am not intending to buy at auction
Artificial Adjustment of Interest Rates
G'Day
What we are now seeing is the natural market correction of the artificial constraints imposed in 2001 in order to 'boost consumer confidence'.
These extreme reductions in interest rates created artificially low rates - 'lowest interest rates in 37 years' - in fact, I think in Australia we plumbed the depths of lowest rates in nearly 40 years!
Well, what goes up must come down, and what is compressed will rebound.
What is the charming expression used in the US – ‘exploding’ loans – when the honeymoon rate period is over?
Well, the honeymoon looks as if it is just about over, for now.
We have had a wonderful run for the past six years, and now it’s back to reality.
Whilst I cannot quote any handy statistics, I believe that the long term average domestic rate in Australia is certainly higher than we have now, some of my bank loans are already over 9% (ANZ 9.17%) and another .25% increase will add more than $100 per week to my already rather interesting interest bill.
However, what’s the alternative? When the going gets tough, it’s the tough ones who get going. If need be, I could always take on a morning paper round delivery, or review all the rents in the investment properties, or take in HomeStay students! One option I will not be exercising is selling, particularly now.
With rents still running at low levels in most areas, many half-hearted investors may well be tempted to sell up and invest in fixed deposit or on-line savings accounts which will undoubtedly increase in order to attract depositors. As there is very little money to be had out there in the global markets, the fall back position is to attract the domestic depositor.
Although stock is in short supply in most established areas, even a small influx of investment sales will influence the market, particularly if there is not sufficient lead time to present the property properly or if it is tenanted during the sales campaign.
So, what’s to be done? Not a lot. When the money markets open up again (when is that, did I hear you say?) then rates will change again. The overnight Cash Rate has little to do with the cost of money, although the gap is not usually as wide as it is now, and it is likely to widen considerably further before it closes again, these are just the usual vagaries of operating in a competitive market.
But after all, we wouldn’t want Mr Jones to come back again, would we!
Cheers
Kristine
G'Day
What we are now seeing is the natural market correction of the artificial constraints imposed in 2001 in order to 'boost consumer confidence'.
These extreme reductions in interest rates created artificially low rates - 'lowest interest rates in 37 years' - in fact, I think in Australia we plumbed the depths of lowest rates in nearly 40 years!
Well, what goes up must come down, and what is compressed will rebound.
What is the charming expression used in the US – ‘exploding’ loans – when the honeymoon rate period is over?
Well, the honeymoon looks as if it is just about over, for now.
We have had a wonderful run for the past six years, and now it’s back to reality.
Whilst I cannot quote any handy statistics, I believe that the long term average domestic rate in Australia is certainly higher than we have now, some of my bank loans are already over 9% (ANZ 9.17%) and another .25% increase will add more than $100 per week to my already rather interesting interest bill.
However, what’s the alternative? When the going gets tough, it’s the tough ones who get going. If need be, I could always take on a morning paper round delivery, or review all the rents in the investment properties, or take in HomeStay students! One option I will not be exercising is selling, particularly now.
With rents still running at low levels in most areas, many half-hearted investors may well be tempted to sell up and invest in fixed deposit or on-line savings accounts which will undoubtedly increase in order to attract depositors. As there is very little money to be had out there in the global markets, the fall back position is to attract the domestic depositor.
Although stock is in short supply in most established areas, even a small influx of investment sales will influence the market, particularly if there is not sufficient lead time to present the property properly or if it is tenanted during the sales campaign.
So, what’s to be done? Not a lot. When the money markets open up again (when is that, did I hear you say?) then rates will change again. The overnight Cash Rate has little to do with the cost of money, although the gap is not usually as wide as it is now, and it is likely to widen considerably further before it closes again, these are just the usual vagaries of operating in a competitive market.
But after all, we wouldn’t want Mr Jones to come back again, would we!
Cheers
Kristine
I'm personally about to fix some for 3 years... in hindsight should have done it earlier but thats the way it goes. Can't really see them going down so I'm fixing.. Shame the rate is 7.79% 
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