Standby for the backlash !!!

[Savanna100]

Well, I reckon that there is trouble brewing for us investors as we are now about to be targeted politically.

See below an article I just extracted from Yahoo!

Housing imbalance may stop rate cut: ALP

The imbalance in the housing market could prevent the Reserve Bank from cutting interest rates, federal Labor said.

Opposition treasury spokesman Bob McMullan said if not for the problems in the housing sector, the Reserve Bank would have no trouble cutting rates.


The bank's board was meeting Tuesday, the first since the US Federal Reserve cut rates there last week.

Mr McMullan said the Reserve had been raising concerns about the strength of the housing sector, and particularly investment housing, for some time.

He said there was now only a 50-50 chance of the Reserve cutting rates.

It would be a pity it could not cut rates because of the housing imbalance, Mr McMullan said.

"The objective economic circumstances do suggest that for ever reason but one you'd expect the Reserve Bank to be delivering an interest rate cut, but we have a serious imbalance in the economy where there's been a big blowout in housing prices and property prices and particularly in investment property," he told reporters.

"The treasurer (Peter Costello) has allowed this imbalance to grow and get out of hand and it could cost taxpayers an interest rate cut (Wednesday)."

Mr McMullan said he had concerns that unemployment could rise over the next 12 months.

Australia's relatively higher interest rates were also pushing up the dollar, making life extremely difficult for exporters.

"If we were the only developed country that didn't get an interest rate cut, that would be a great pity," Mr McMullan said.

"I understand why the Reserve Bank is so worried about the blowout in investment housing.

"The property market could be over stimulated even further by an interest rate cut."
(end quote)

So, standby for banks to tighten up loaning practices and for all the general whingeing that I feel sure will ensue.

Just thought you'd like to see this.

 

[bkw319]

I wouldn't worry too much. It's called scare mongering.

The Reserve Bank wants to and has to drop rates to stimulate the rest of the economy and keep up with the rest of the world but they are worried about the extra boon this will give to property investors as they are worried that the market is over stimulated.

As they really have no option but to eventually drop rates they resort to the scare tactic to worry people out of it.

I recommend you do your due diligence and you will still find good properties and leave it to the amateurs to blow all their dough. There are plenty of people out there that just buy anything for any price and consider that to be a wise investment. I think it these people that the govt is concerned about and it is them who they are trying to scare.

 

[Michael Croft]

Hi Savanna100,

50-50 chance of a rate cut!? Talk about having a bet each way. I like Bob, I really do, he is a non aligned member of the ALP with some brain power and he was a near neighbour for years. Unfortunately for Bob he is in opposition and with Simon Crean at the helm of the ALP will remain there for at least another term possibly two. So his opinion carries about as much weight as mine with the Reserve Bank - sweet fanny adams. The only difference is that his 'opinion' is politically motivated.

We shall see tommorrow. regards, MC

 

[brains]

Anyone want to have a go at what the RBA result wil be tomorrow?

I reckon its an 80% chance they will drop rates by 25 basis points.

 

[XBenX]

Originally posted by bkw319



As they really have no option but to eventually drop rates they resort to the scare tactic to worry people out of it.

The ALP and the RBA are very different beasts, if the RBA wants to worry ppl out of it they will make their own statement - the only reason the ALP made a stmt was for political "told you so" brownie points in case what they are predicting comes true.

Originally posted by bkw319


The Reserve Bank wants to and has to drop rates to stimulate the rest of the economy and keep up with the rest of the world but they are worried about the extra boon this will give to property investors as they are worried that the market is over stimulated.

we dont need to "keep up" with anyone - thanks to pre-emptive interest rate adjustments previously - our economy is one of the strongest of the OECD nations both our growth and inflation are looking good....i think growth was just recently announced at 2.8 or 2.9% - not bad considering the environment we are in.

what we do need to watch is..... interest rate differentials (although I feel due to the fact the perfect mobility of capital theory does not hold in the real world this is a limited concern)

having said all that BS - I do agree with you and I feel a cut of 25 basis points will be announced (reflecting the pre-emptive bias of the current board.

yesterdays fin review has a Reuters survey showing 12/21 economists were predicting a cut.

 

[Sim]

Originally posted by XBenX
yesterdays fin review has a Reuters survey showing 12/21 economists were predicting a cut.

That's less than were predicting a cut last week - more than 60% I think it was. The strength of the housing market is causing them to waver in their belief that a cut will come I think.

 

[Savanna100]

Some further thoughts, (I'm feeling grizzly today !)

If the government are concerned about oversupply of rental properties (which is what the subtext of this article is about)
Should I be?....as an owner of 5 houses and another in the pipeline, I can't really afford to have any vacant (one is vacant at the moment, our oldest and most down-market).

I'm just concerned that things have the potential to stuff up....first the FHOG takes part of our market, then vacancies start to climb (take a drive round Sydney and see all the "for lease" signs everywhere) then the Govt starts whingeing about those of us trying to make a future pension-free life for ourselves.

The bottom line may well be that the stockmarket has been losing punters (who may well have moved to the property sector) and the Powers-That-Be want them back, hence the doom-mongering and the schemes like that outlined on the front of the SMH regarding the 'Wizard/Malcom Turnbull' proposal to create a market for people to invest in other peoples mortgages.

Whatever happens, I suspect that the investment property scene may have some big changes coming in the next couple of years.

 

[michaelg]

hmmm, investing in other peoples mortgages.... now why does that sound so familiar?

Michael Gruber
President
Vendor Finance (WRAPS) Association
www.financewraps.asn.au

 

[bkw319]

Originally posted by XBenX
The ALP and the RBA are very different beasts, if the RBA wants to worry ppl out of it they will make their own statement - the only reason the ALP made a stmt was for political "told you so" brownie points in case what they are predicting comes true.

Yes, sorry, you are right. I just lazily sped read it and assumed it was the same stuff being suggested by the Reserve bank lately. Which it is, but as you say, with a different motivation.

Cheers Brett