Investors should take note of lower interest rates
Investors who have been sitting on the sidelines waiting for lower interest rates, may wish to get back into the real estate market, following a recent announcement from the Reserve Bank of Australia (RBA).
RBA governor Glenn Stevens reported that the official cash rate was to be cut by 50 basis points to 3.75 per cent, effective May 2.
In a statement, Mr Stevens referred to sluggish performance in certain sectors – including the housing industry – and a general economic condition that demanded such action.
While the combination of lower interest rates, affordable prices and projected growth offer lucrative options for property investment, there is some concern that borrowers will not see the benefits of such reduced rates.
Mr Stevens acknowledged that lenders have been keeping interest rates high, despite the actions of the RBA.
“As a result of changes to monetary policy late last year, interest rates for borrowers have been close to their medium-term averages over recent months, albeit tending to increase a little as lenders passed on the higher costs of funding their books.”
Stakeholders of the property industry also hold concern that the banks will not chart the same course.
“It is imperative that lenders pass on this rate cut in its entirety to help restore economic activity and confidence levels,” said Real Estate Institute of Queensland chief executive officer Antony Kardash.
“Indeed, lenders’ continual excuses about higher funding costs are not only starting to sound very stale but also increasingly self-interested.”
Housing Industry of Australia chief economist Dr Harvey Dale shared similar sentiment: “It is drawing a long bow to use bank funding costs as an excuse for not passing on today’s RBA interest rate cut in full to both Australian businesses and households.”
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Interesting article.
Some lenders have clearly passed the bulk of the reduction on to their customers, whilst others have passed only a smaller amount (less than.30%), and some lenders who have not yet announced their intentions.
I actually blogged in great detail about the interest rate cuts, but from the perspective of them being coupled with relaxed LVR’s being offered and negotiated by lenders. I would suggest that the combination of both should help to encourage consumer confidence and for Australians to start purchasing property in their own country again (which was clearly the RBA’s intention for this in the first place).
But, there are pro’s and con’s of relaxed LVR rules combined with lower interest rates. Have a read of the list here if you get a moment:
http://propertyspectator.blogspot.com.au/2012/05/todays-interest-rate-cuts-coupled-with.html
[quote=Cameron McEvoy]But despite some growing negativity, my perspective is that now is the time for action.
http://propertyspectator.blogspot.com.au/2012/05/todays-interest-rate-cuts-coupled-with.html
[/quote]
Aaagh I see. This global financial mess is just a small blip in the system and given the discounting that’s going on I should jump in boots and all and grab the bargains.
Cam if you’re going to write a blog how about something with some meat in it. Not this lame airy fairy regurgitated rubbish with wishy washy opinion.
Hi Freckle,
Thanks for your feedback, I greatly appreciate it. My perspective is that the global financial mess is one that is affecting many markets in many ways, but Australia is effected differently to some other markets; and the research I’ve done leads my opinion to believe that despite negative growth, now is a good time to invest (in some markets in Australia, obviously not all, because as you know, the AU market is made up of many other sub-markets).
I have never claimed to be a fully matured seasoned property expert. In fact, I go into every blogpost or article for other site I write for – affirming that I am a young investor who is learning the traps.
I think my critique does have meat to it. I run survey campaigns to targeted contacts, trawl through 3rd party metrics and data resources, and read with great attention others’ posts and expert thoughts, before I begin to write.
And even though I do all of this; when offering my perspective, I still always affirm that it is just ‘my opinion’. It is by no means definitive. It is great that we disagree on this one, and I welcome constructive criticisms and counter-argument, because when it comes to predicting future trends, nobody can ever be entirely right or wrong.
I’d be keen to hear more from what you’ve written – could you send me some links in the various places you’ve voiced opinion? I enjoy reading others’ perspectives and perhaps I could learn more from you too.
Thanks Best Regards,
Cameron
Nothing wrong with having an opinion but opinions from young inexperienced individuals come across as presumptuous. There’s more bloggers than there are hairs on a cats back and much of what I see is written poorly or simply boring.
If you want to bang on about PI you really need to offer a fresh perspective or something more useful than mere opinion.
PI’s are generally after quality information and knowledge. What you offer is fairly light by comparison (no meat). If you want to be taken seriously as a blogger then have a look at bloggers/sites such as:
http://macrobusiness.com.au/
http://www.zerohedge.com/
http://www.traderview.com/tedbits.asp?sid=agr
http://www.mpettis.com/
http://globaleconomicanalysis.blogspot.com.au/
http://www.alsosprachanalyst.com/
If you’re going to express an opinion with attached recommendations then you’re going to need to support it with much more than your current blog.
Click on members Nicknames and you can bring up all their posts if you want to check someone out.
Hi Freckle,
Thanks for your feedback and I welcome the criticism.
I do acknowledge and appreciate your point of view. I’ll continue to grow in as many directions and capabilities as I’m able to.
The kinds of URLs given above are indeed a step in the right direction of where I’d like I’d like to steer towards in my writing/commentary, though they require a level of investment (even to buy the domain names they use!), time dedication (challenging for an average-income full time worker, to maintain on the side), and plethora of experience (which I do not yet have – hey, I’m a young guy!)
I never intended to start out being an expert in macro economics (such as several of the URLs you’ve supplied), but I do value their insight and trusted data sources to which you refer. And I do value your position that posts need to be backed up with meat (to which I believe you’re referring to hard data, metrics, and numbers from third party unbiased sources).
As for knowledge; I write about what I know. When I don’t know something as well, I usually pose it as a question to the community. If you read my blog you will see that this is so. I don’t think there is anything wrong with asking questions when you don’t know the answers.
Again thanks for the criticism, and being ever the ‘optimistic realist’ that I am; I’ll continue plodding along with small bricks, because small bricks build big houses.
Take care, and best of luck.
Cameron