Oasis Property: Sydney Buyers Agents
'09 Interest Rate Outlook:
JANUARY 2009
The current RBA rate being set at 4.25% is a complete turnaround from the same topic one year ago. With aggressive monetary policy being set to stave of inflation - at present it seems that Oz's biggest bankers see the risk of recession as a far scarier proposition
I usually like to be able to give some type of probable scenario to my audience when I speak with respect to the property and how rates affect values. As a long time property researcher, I am confident that the fundamentals of supply and demand with other drivers will keep a floor under Sydney home prices - but there is no denying that sentiment is a powerful thing in this current environment - so I won't say how long it will take for this to have a positive affect on Sydney home prices.
In general though, most people subscribe to the theory that property prices INCREASE as a result of lower interest rates. While this can be true, one has to realise that in fact interest rates are an intentional financial instrument (albeit somewhat blunt!) used by governments to influence macro and micro economies (ie. business/trade and personal/individual finances). What this suggests is that while we may be heading into a lower interest rate environment - we are here because of a dominating reason. That is, the economy is starved of credit, and government is aiming to stimulate growth and inject liquidity into an economy that is contracting. This usually translates to slow moving trends that drip feed into the community. Meaning, their actions do not usually cause 'floodgate' type movement back to the ideal market environment. This usually returns in moderation, and other ebbs and flows of sentiment (percieved) and the real economy (statistical data)
Whenever the typical buying emotions of FEAR or GREED are demonstrated by the market they usually are typified by:
a) FEAR - people will pile out of markets VERY quickly (as seen by recent stock market collapse)
b) GREED - people will aggressively pursue buying strategies to buy quality stock (in property or stock) but not at the same pace as those with FEAR.
but this is time when neither or both may be present, and it leaves us in a state of flux. I just call it:
c) PROCRASTINATION - most people will sit on their hands until they are given clear signs that the coast is clear, and the threat of doom and gloom is over. After the bust, people usually err on the side of FEAR (even while procrastinating) and it takes some time to graduate to a 'greedy' mindset, rather than a fearful one. and I see this time as no exception. So my tip is this:
Property will improve over time, but our current situation is such that any change in sentiment (and property growth) with NOT occur instantly. Those that think it will are kidding themselves and must have a vested interest in telling you it is. See some of my industry counterparts supposedly writing newsletters for the past 10 years (??), seem to insist each time over this period they wrote that 'now was the best time to buy property'. This is some advice you could probbaly do without. If anything the market is staggered, and there are areas to jump at now, others we should be prepared to sit and wait it out on, and others you should consider it only a medium term reality to be joining the market. I would suggest at worst, our property market woes will last 12-18 months, but that is no inclination to jump in now at all costs. Take your time to research, ask yourself what your goals are, and be ready to go when the time is right. See our newsletter page for a closer update on market predictions and conditions.
On a lighter note also though, for those of you carrying a simple mortgage, it looks like it will only get easier. February interest rate god's seem likely to deliver a .75% cut, although others more conservative suggesting .50%. Either result can only help those in mortgage stress, although my tip is that it will take another one or two rates before extra cash delivers money back into the economy. Underlying data reveals a struggling economy, and the recent rate cuts seem (to the tune of 73% of surveyed sample) to be only assisting with paying down Aussie's credit card and mortgage debt, not with the impetus to be spending excessively to fuel growth. At present most signs point to this continuing in the near future, while job insecurity remains and sentiment is so low.
If you would ever like some advice on your loan or the possibility of upgrading to a new product, please feel free to contact us and discuss this with one of our mortgage brokers that are here to help.
For a no obligation call, contact 1300 55 980 or email info@oasisproperty.com.au |
