Resources: Market Update

TO FIX OR NOT.

Posted 27/05/09

With interest rates at historic lows the dilemma to fix or not to fix is the question that is on a lot of borrower's minds.

Each situation needs to be judged on its merits and just because rates are low it doesn't mean that you should consider fixing. 

AMP Capital's chief economist Shane Oliver says unfortunately "Most people get it wrong. It tends to be the case that Australians start fixing when interest rates are getting high. There was a lot of interest in fixed rates when rates were higher." 

He later went onto say that "The trick is to lock those rates in so that people are protected when rates are higher, up towards 10 per cent. People have probably got the next six to nine months to fix their loans and take advantage of current deals."

Most experts agree and that is treat fixing rates as an insurance policy. 


INVESTORS MARKET UP TOWARDS END OF YEAR.

Posted 25/05/09

In the latest Inner Melbourne Apartments report from BIS Shrapnel, investors are expected to return to the property market towards the end of this year.

BIS Shrapnel anticipate that with vacancy rates of around 1%, a shortfall in new apartment construction and historical low interest rates that these factors will drive strong investor activity.

Underlying all of this is market sentiment and the belief that the market has bottomed. 

As a result demand should increase over 2010 and 2011.


AUSTRALIA IS WELL PLACED.

Posted 21/05/09

Reserve Bank of Australia governor Glenn Stevens believes that whilst Australia could not avoid the global recession, they were better placed than others to take part in an improved international recovery.

At a recent conference he said "it is too soon to say this is beginning yet, though developments over recent months are certainly consistent with the view that a recovery will get under way towards the end of the year,".

He later revealed that a key factor in this was the more conservative lending practices of the banks, their capitalisation as well as their profitability; something many countries can't claim.


GENUINE SAVINGS NOW THE STANDARD.

Posted 18/05/09

The standard to show genuine savings to lenders when borrowing is now becoming the norm.

Bankwest and Homeloans Ltd are following the lead of the other major lenders by implementing a genuine savings requirement.  Effective immediately, both banks now require 5% of genuine savings for all loans where greater than 85% of the purchase price is borrowed.

This falls in line with the 5% genuine savings requirement by the CBA but not as tight as the Westpac and ANZ who require 5% genuine savings where greater than 80% of the purchase price is borrowed.


FIRST HOME BUYERS GRANT.

Posted 15/05/09

The Federal Government has decided that the First Home Owners Boost scheme will continue until October 1, 2009.  Currently those buying new homes will receive $21,000 and those buying existing homes will receive $14,000.

As of October 1, 2009 the boost for First Home Owners will halve. This will see the scheme drop to $10,500 for those buying existing homes and $14,000 for those buying new homes.

As of December 1, 2009 the $7,000 grant will continue to be available to all first home buyers however the First Home Owners Boost scheme will cease.


BUILDING APPROVALS UP AGAIN.

Posted 06/05/09

New housing data is showing early signs of a recovery with building approvals rising for a second consecutive month.  Australian Bureau of Statistics showed building approvals rose by a seasonally-adjusted 3.5 per cent in March.

Housing Minister Tanya Plibersek said in a statement "A strong housing market is critical for underpinning confidence and supporting jobs in the Australian economy." 

The Federal Government has yet to officially commit to whether the First Home Buyers Grant will be extended beyond June 30.


RATES MAY STILL GO DOWN.

Posted 06/05/09

RBA governor Glenn Stevens has hinted there is still a possibility of further monetary easing.

He said "In assessing whether further reductions in the cash rate are required over the period ahead, the board will monitor how economic and financial conditions unfold, and how they impinge on prospects for a sustainable recovery in economic activity,"

The International Monetary Fund (IMF) believes Australia has "considerable" room to move and could cut interest rates again however "forceful" monetary and fiscal policies will need to be sustained throughout 2010.

Whilst Australia has enjoyed a 425 basis points cut since September they still remain the highest amongst the world's advanced economies.


RATES ON HOLD.

Posted 05/05/09

The RBA has kept the official cash rate at 3% for May meeting market expectations.

RBA governor Glenn Stevens said "monetary policy has been eased significantly. Market and mortgage rates are at very low levels by historical standards and business loan rates are below average, reducing debt-servicing burdens considerably,"

"Much of the effect of these changes is yet to be observed. The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead."

The RBA is predicting inflation will continue to fall, as demand for labour weakens and labour costs fall.