I don't think it matters too much whether rates drop or not. The very fact that rates are unlikely to go up again for the foreseeable is going to have a very positive impact on the property market, especially in Sydney, which is where demand is currently outpacing supply by the greatest margin. The interest rate outlook is much more benign for property now than it was in late 2010.
RBA's Unofficial Briefings: Interest Rates Headed Down Soon
- Thread starter annie lumen
- Start date
...further reinforcing the fact that the RBA are more a reactionary force than a predictory force.
I think that interest rates will sit where they are on the basis that the dollar is very strong, we are a resource economy, and we have a strong carry trade going on (this is where people in countries like the US borrow money locally at low interest rates, then send it over here to receive high australian interest rates)
So, if the carry trade starts to unwind, the australian dollar will fall, the cost of money to banks will go up, and so interest rates may go up.
But, if this happens, then the price of exports will go down, more money will come into the country, and so we get downward pressure on interest rates.
I see a lot of change in the economy, but I think that we are lucky because whatever change occurs, upward and downward pressure factors on interest rates cancel one another out
The only thing that could really go terribly wrong is if China/India stopped buying our stuff, which I dont see happening anytime soon, since a lot of those contracts to China/India are locked in for years
So, if the carry trade starts to unwind, the australian dollar will fall, the cost of money to banks will go up, and so interest rates may go up.
But, if this happens, then the price of exports will go down, more money will come into the country, and so we get downward pressure on interest rates.
I see a lot of change in the economy, but I think that we are lucky because whatever change occurs, upward and downward pressure factors on interest rates cancel one another out
The only thing that could really go terribly wrong is if China/India stopped buying our stuff, which I dont see happening anytime soon, since a lot of those contracts to China/India are locked in for years
Who the hell are you supposed to believe, it makes you wonder how many of these articles are informed opinion, and how many are just propaganda.
http://www.smh.com.au/business/on-borrowed-time-rates-set-to-rise-20110401-1crjh.html
http://www.smh.com.au/business/on-borrowed-time-rates-set-to-rise-20110401-1crjh.html
The author of the above article has links to the financial planning and broking industries. He isn't especially well regarded and you won't see his name in the Wall Street Journal or the Financial Times.
Go to the RBA's own website and do your own charts - that way you will be able to see what's happening with your own eyes. Our two-tier economy is weakening, and the high exchange rate isn't helping our export industries. The RBA has no alternative but to cut rates this year. When it happens, you will remember that you read it here first.
Annie L, I just can't see the RBA dropping interest rates myself.
One of the RBA's basic goals you would agree is the maintain inflation in the 2 to 3% band, right?
The mining sector's demand for skilled labour is pushing up wages across the economy, propsectively feeding inflationary pressures immensly.
Offsetting this is a weakness in other economic sectors as we know - retail, construction, tourism, etc are all in a sustained slump.
This brings us to the other of the RBA's basic goals, to keep the overall economy as healthy as it can (i.e. low unemployment, steady balanced growth, etc).
So the RBA is faced with a difficult choice: Which one of its two basic goals - now that they are diverging under pressure from the commodities boom - does it prioritise?
If the RBA reduces interest rates it could let the inflation genie out of the bottle, and we all know how very hard it is to catch that genie and get it back into its bottle.
If the RBA doesn't reduce interest rates however the non-mining sectors will continue to languish.
My bet is that the RBA will continue its current policy of allowing the non-mining sectors to continue to languish rather than inadvertently unleashing inflation across the entire economy with interest rate cuts, resulting ultimately in overall economic contraction.
This doesn't please me one bit, I must add, because I manage a business in the construction sector in Sydney and that industry's been in virtual recession for years now, making my own job very difficult indeed. (Moreover, it's precisely why I just purchased an IP in the Pilbara, as in that way I could have some personal exposure to the wealth gains being generated there - a kind of hedge play, if you like.)
You won't be seeing anything but a temporary small rate cut (if interest rates are reduced at all) for the foreseeable future unless Asia's demand for minerals subsidses significantly, and the chances of that are miniscule, in my admittedly non-expert opinion (barring a black swan event).
So I'm suggesting you'd be absolutely crazy to factor any downward movement in interest rates into your PI strategic thinking. You may as well wait for house prices to crash 40% before buyng in!
Belbo
One of the RBA's basic goals you would agree is the maintain inflation in the 2 to 3% band, right?
The mining sector's demand for skilled labour is pushing up wages across the economy, propsectively feeding inflationary pressures immensly.
Offsetting this is a weakness in other economic sectors as we know - retail, construction, tourism, etc are all in a sustained slump.
This brings us to the other of the RBA's basic goals, to keep the overall economy as healthy as it can (i.e. low unemployment, steady balanced growth, etc).
So the RBA is faced with a difficult choice: Which one of its two basic goals - now that they are diverging under pressure from the commodities boom - does it prioritise?
If the RBA reduces interest rates it could let the inflation genie out of the bottle, and we all know how very hard it is to catch that genie and get it back into its bottle.
If the RBA doesn't reduce interest rates however the non-mining sectors will continue to languish.
My bet is that the RBA will continue its current policy of allowing the non-mining sectors to continue to languish rather than inadvertently unleashing inflation across the entire economy with interest rate cuts, resulting ultimately in overall economic contraction.
This doesn't please me one bit, I must add, because I manage a business in the construction sector in Sydney and that industry's been in virtual recession for years now, making my own job very difficult indeed. (Moreover, it's precisely why I just purchased an IP in the Pilbara, as in that way I could have some personal exposure to the wealth gains being generated there - a kind of hedge play, if you like.)
You won't be seeing anything but a temporary small rate cut (if interest rates are reduced at all) for the foreseeable future unless Asia's demand for minerals subsidses significantly, and the chances of that are miniscule, in my admittedly non-expert opinion (barring a black swan event).
So I'm suggesting you'd be absolutely crazy to factor any downward movement in interest rates into your PI strategic thinking. You may as well wait for house prices to crash 40% before buyng in!
Belbo
I suppose the only people to trust are those betting on it, and that is why I tend to watch the short end quite closely.
Any change in sentiment is immediately reflected, so take a look at the 90 day bills, an watch how the curve changes.
Any change in sentiment is immediately reflected, so take a look at the 90 day bills, an watch how the curve changes.
Thought that might be the case, hurry, hurry, fix now!
one tier may be weakening but I understand there is over $250 billion to be unloaded over the next few years in committed resources projects. In reality the best thing for the country would be for WA/Qld/SA to adopt its own monetary policy and currency, which would allow the south east to save and even prosper its service and manufacturing base, but that would never happen so unfortunately those industries wil be creatively destroyed to make room for the resources projects.
any dip coud only be a temporary reprieve. the painful transition of wealth from east to west is yet to fully play out and indeed could take some time - this will have ongoing knock on effects in this country
Yep, follow the money and not the fish and chip wrapping
Time to bump for a thought on the difficulty of prediction!theres inflation and then theres inflation. Some needs to be focussed on, others less so.
but i'm getting lazy here.
If rates go up, so does rent.
Coupla bucks per week.
The amount rents rise with a rate increases is dwarfed in comparison to the amount property falls in price. It's only pocket change so i dont know why people go on about it.
The amount rents rise with a rate increases is dwarfed in comparison to the amount property falls in price. It's only pocket change so i dont know why people go on about it.
If there is room for rents to go up, why not put them up now?
Surely you set your rents at what the market can afford, I always did.
Yep, if they cant afford a house they will just have to bid up the rental market.
If interest rates go up, then that is a reference to some point in time in the future not now. At that point, there is an implication that the economic conditions will be different for interest rates to go up. This may provide the opportunity for rent increases, assuming no fixed leases etc...
I don't think you could interpret Aaron's comment that he is under pricing his rentals.
Interesting discussion - but I'm just thinking that the RBA hasnt moved in the last "X" months & currently rates are going down through the lenders - some may infer this could be as part of their break up/war. Good spin IMO.
However it seems what the RBA does vs what is actually happening in the market - currently - seems to be two different things.
However it seems what the RBA does vs what is actually happening in the market - currently - seems to be two different things.
Are you referring to fixed loan rates or rates more broadly (including deposit rates)?
