Quite a bit of property news to digest this week – so much that we’ve made this into a special RBA Governor’s edition.
- RBA wary of property bubble – under testimony to a parliamentary standing committee on economics, Governor Glenn Stevens has indicated he wants to keep a lid on housing credit. He issued a warning to property investors about a dangerous reliance on capital gains. Prices, he said, can and will fall. His remarks have been taken as a clear sign that policymakers have become more cautious about a potential property bubble.
- The economy has turned the corner – so says the Guv. The RBA believes we are on the cusp of a revival, with higher productivity in the wings & potentially better than 3% growth rate. But there’s a challenge ahead for the Government to bring the budget under control & deal with medium-term issues and budget shortfalls. On the horizon, the RBA expects unemployment to increase; peak over the year; and then fall. Inflation is expected to decrease from levels approaching 3% during the year.[sam id=41 codes=’true’]
- Home buyers may be forced to show they can handle a 4% rate hike before being granted a home loan – an idea put forth by RBA Government Glenn Stevens to the House of Reps Economics Committee this week. GS emphasised he did not want investment to accelerate beyond its present pace, and warned about taking on too much leverage in the expectation that prices will be ever-rising.
- Confirmed – cashed up Asians are bidding up Australian home prices, with inner city areas feeling the greatest pressure, according to – you guessed it – Glenn Stevens. He warned homebuyers that the next direction for interest rates will be up.
- The last word from Peter Switzer – Glenn is not worried about a housing bubble but is watching the investors piling into housing. I think the four per cent call could be bigger than it has to be. But…..this tells me if you can’t live with a 4% interest rate rise say over three to four years, then a fixed rate could be a good idea. And fixing for the longer the better, but do all of the homework on the loan product including the break cost, the fees, etc. And get some good advice on the subject.
White Crash in Asia
Well if interest rates rise anywhere near 4%, then the current recovery is all over. Crash, that’s the word I am looking for, CRASH, maybe best to throw in an exclamation mark at the end. In bold, too. CRASH!
So fix your interest rates ladies & germs; & hope that the Guv’s magic 3%+ pudding comes true – so much more likely now that interest rates & unemployment are set to rise.
Hopefully you have bought a dwelling the Chinese might like. Also best make friendly with your local money laundering enterprise – the most likely source of your buyer come resale – and pray that GS has got it wrong.
But seriously, 30 years ago Mr Lee Kuan Yew labelled Australia “white trash in Asia”. Well maybe not trash, but if we don’t rein in current expectations & get ready for some serious hard yards, “white crash in Asia” might well apply.