'As Global Central Banks are poised to ease monetary policy even further after a wave of interest rate cuts from India to Poland…BOJ doubled its monthly bond purchases…the Fed increasing bond buying above $US85 billion a month' (11-12 May, 2013, AFR, Central banks get set for more rate cuts, Bloomburg).
There is a couple of interesting articles in the Weekend AFR discussing global monetary policy which is obviously extremely poignant to us property investors. Even more so considering the recent easing cycle in the cash rate.
I would like to open a discussion directed particularly at the mortgage brokers and experienced property investors who perhaps have lived through a number of these cycles. However, it would be great to hear from anyone who wishes to make comment….As the world seemingly becomes awash with 'cheap money' what does this mean for Australian property investors.
Will obtaining finance for property from lending institutions become easier and what will be the effect on property markets….
Jack
Hiya,
Interesting topic. I do think about this as well. I think it signals that the economy is not doing well, possibly worse to come.
These are my thoughts:
In the short term, there will be more people who can buy properties,
In the short – medium term the possibility of losing one’s jobs are getting bigger.
So even if the people who buy property have been careful, there could still get into trouble.Back in the 1990s-2000s it was easy to borrow because economy was booming, lending criteria was laxed.
This time round, lending criteria is tight however the low interest rate makes people borrow more.
Like in the 1990s-2000s period, people may get into trouble because they lose their jobs. The difference is: the probability is much bigger now because the economy is not doing well.The key to overriding this period is also liquidity – having enough cash flow. The 1990s-2000s period liquidity problem came from high interest rate, living beyond your means using credit card, etc. People have their jobs, but simply cannot pay their expenses.
This coming period of 2010s is about job losses, reduced income and shouldering family and/or tenants who lose their jobs.Implication for those thinking of buying
1. Make sure the property is in area where there is jobs, so tenants (for IP) and yourself (PPOR) have a better chance of keeping their jobs. These Job centre towns must be supported by
a. various industries offering jobs, not just say tourism or manufacturing. The more the better.
b. The industries must be robust / resilient, meaning really needed by a lot of people or subsidised by government. For example, the army.2. The property value will go up or down depending on the demand ie. no people buying, prices go down. Where there is jobs, there will be property demand and prices will respond accordingly.
3. Cash buffer is more important than ever because tenant (for IP) or you (PPOR) may lose his job, but you still need to pay interest and other costs. In The 1990s-2000s one can wing it and hope for the best. Not in 2010s.
Implication for those who are selling
1. Depending on your location, ie. job centre or not, you may want to sell now.The adage location, location, location still holds true.
Cheers,
CattsCattleya
Here to learn the ropes of property investing & share knowledge, not trying to sell anything at all.
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