Rates, Rises & Predictions

I’ve been watching our local housing market grow over the past 12 months and have talked to people with genuine concerns that maybe things are about to change so I decided to look a little deeper.
Below is some of the “stuff” I’ve discovered, I’m not an investment guru and certainly don’t have a magic crystal ball, but I have plenty of experience in both the boom & bust markets so take what I say with a pinch of Salt, or Casuarina & Kingscliff.

Capital city property values have increased on average by 7.8% since the RBA rate cut back in May 2016.
I can quite comfortably confirm prime real-estate property values in major cities and sweet places to live like here on the Tweed Coast have surpassed that figure easily.
The massive interest in our housing market over the past eight months which has pushed prices skyward is due to more than just record low mortgage rates. Cashed up Sydney & Melbourne buyers have finally discovering what we have here, and want some of it for themselves.

Apparently weekly wages are now at their slowest annual increase since the Australian Bureau of Statistics started taking records back in 1997 being just 1.9%pa.
Our economy is expanding at 2.5%pa but we are experiencing low inflation of 1.5%, well below the RBAs apparent target range of 2 – 3%pa.
Job prospects are OK, if you are prepared to travel but unemployment is still around 5.75% so the RBA really should be considering interest rate cuts.

Why aren’t they?
Well we are also experiencing record high levels of household debt. Basically most Aussies spend more than they make, I could go on about the ratio of household debt to disposable income was a record-high 186.9% but then I’d lose you (if I already haven’t) and I’m sure I’ve mentioned more records already than you will find in the Guinness Book of Records.

We’ve got high debt, high property values, low inflation, low interest rates, life should be good but I’ve heard stories of people who are struggling to get by week to week and feel change is coming.

Whatever way you look at it; the RBA is powerless to change this! They can’t lower rates because this will add further fire to the already smoking hot housing market, and they can’t raise rates as this will reduce money in the pockets of a huge chunk of everyday Australians, which will reduce our appetite for all things unnecessary and, potentially place some upwards pressure on the Australian dollar but that’s another story.

What does this mean?
If you are selling, then you’ve picked a good time to sell, be happy and enjoy the capital growth and extra cash!
If you are buying, sure competition will be strong but the short term outlook is positive, you will make money but as always buy within your means.

Sources: http://www.onthehouse.com.au & http://www.corelogic.com.au

 

Brent Jones – PRDnationwide Tweed Coast

 

 

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