Good news for the Australian property sector. In his announcement yesterday that interest rates would stay on hold, Governor of the Reserve Bank Glenn Stevens commented that while household spending is “likely to slow somewhat,” stronger dwelling activity and government spending “will start to provide more support to overall demand soon, and is likely to firm into 2010”.
Stevens is concerned that if the already record low interest rates are allowed to remain they may fuel a housing bubble and destabilize the economy.  The change has been largely due to improvements in Australia’s second largest export market, China.  
Paul Brennan, an economist at Citigroup Inc. in Sydney predicted “The next step will be for the Reserve Bank to begin to withdraw at least some of this accommodative setting,” starting in December with a quarter-point increase”.

Craig James, a senior economist with the Commonwealth Bank of Australia, suggests that Stevens is “certainly not suggesting that rate hikes are imminent.”  “The Reserve Bank will want to ensure the economy can stand on its own two feet — without being propped up by the government — before deciding to lift rates,” James said.
 Stevens also noted that home loan approvals had been solid, with housing prices rising over recent months indicated by increases in the median house price over the eight capitals. However, disturbingly, business borrowing was in decline as companies postponed investment plans in order to reduce debt financing.

Courier mail article. 

Share This

OVERSEAS INVESTORS

Interesting article by Tony Koch in the Courier Mail on Thursday stating that over $1b in Queensland property has been purchased by Overseas Investors in the last year.

Buyers from Britain led the purchase pack last year, spending $252 million, followed by New Zealand ($141.9 million), Japan ($86.1 million), The Netherlands ($75.5 million) and the US ($54.8million).

Indicates that the Realestate.com.au drive internationally will help to market Australian property abroad as will the new Raine & Horne offices in the UK and Dubai.

http://www.news.com.au/business/story/0,23636,22567106-37037,00.html

INTEREST RATES BLUES

This week presented a bit of a mixed bag with the NAB monthly business survey showing conditions slipped again with the worst result since February 2007. The results could be based on increasing inflation, some global turbulence, tightening wages market and the upcoming election. Pundits are placing the liklehood of an interest rate increase by the end of 2007 at 45%.

theage.com.au/news/business/rate-rise-market-woes-batter-conditions/ 2007/10/09/1191695908896.html

ADELAIDE UP, SOUTH AUSTRALIA DOWN

Where Adelaide has achieved an 11.5% increase, overall South Australia have recorded a slump of 3% in the quarterly median house price and the Real Estate Institute of South Australia has blamed drought conditions as contributing.

The Adelaide increase of 11.5% is nearly double the 6% increase of the previous year.

http://www.news.com.au/adelaidenow/story/0,22606,22538552-5006301,00.html

http://abc.net.au/news/stories/2007/10/10/2055398.htm?section=business

CONSUMERS OWN WORST ENEMY

For the 11th time in the past year consumer spending increased in August. Household goods showed consumers were buying more electrical goods like DVD players, plasma screen televisions and gaming machines.

Food spending jumped by one per cent in August, on a seasonally-adjusted basis, while spending on household goods was up by 2.4 per cent. But department store sales were down by 4.2 per cent.

If both property owners and those that aspire to own property do not curb spending and start saving, inflation will increase, interest rates will be increased and the dream of property ownership will move further away.

theage.com.au/news/Business/Consumers-spend-more-despite-rate-rise/ 2007/10/03/1191091164490.html

Share This