Joshua Williamson, a senior economist at Citigroup, noted that the Bank of Canada has justified its cut because its economy faces a "significant and complex adjustment" and is keen to shift Canada's reliance on energy to "non-energy output".
Tuesday, July 21 2015
(SOURC: THE PROPERTY OBSERVER) News Ltd columnist Alan Kohler says it will take nothing short of a recession to bring Australian house prices down. Australian house prices were not in a bubble, but instead, in a "new normal" and are not going to come down on their own, the columnist said. But he noted Deloitte Access Economics’ latest economic outlook where director Chris Richardson said: “The chance of a recession is higher now than it’s been for quite some time. China’s economy is the key.” Alan Kohler referenced the RBA's recent comments: “…there are no examples internationally of large falls in nominal housing prices that have occurred other than through significant reduction in capacity to pay (e.g. recession and high unemployment).” And: “There is no mechanism to get a large and sustained level shift down in prices while a substantial fraction of the population can -- safely and sustainably -- service the obligations involved in paying the higher price.” Finally: “…there is no example in Australia or internationally where supply expansion on its own generated housing price declines of a similar order of magnitude to the increases in prices seen in some Australian cities in recent years.” Noting what’s happening in China, Alan Kohler suggested there is no chance of interest rates going up, so serviceability is only likely to improve. "In fact, rates are more likely to come down further to try to prevent a recession here." Kohler concluded the one bright spot was the big increase in the supply of apartments, which has resulted in smaller price rises among apartments than house, especially in Melbourne. "Those who own a house already are winners; those who don’t will have to buy a flat." Tuesday, July 21 2015
(SOURCE AFR) Australians might think Chinese investors have pushed up property prices, but "we ain't seen nothing yet," according to Colonial First State Global Asset Management chief economist Stephen Halmarick who is tipping the liberalisation of China's capital markets will inflate asset prices acrosss the globe. In recent weeks there has been a lot of focus on the challenges facing China as it opens up its financial markets to foreign investors, and what the associated volatility means for other economies like Australia. "But what will really matter for the world is how China opens up to allow its people to send money offshore. Australians might think they've seen a lot of Chinese investment in the Sydney and Melbourne property market, but we ain't seen nothing yet," Mr Halmarick said at a panel hosted by the Australian Institute of Superannuation Trustees in Sydney. China's main equity market, the Shanghai Composite Index, surged more than than 150 per cent in the 12 months to mid-June as the bourse was opened up to foreign investors, before plunging 32 per cent in a matter of weeks. Since the government intervened to stabilise the market with a capital injection in early July the Shanghai Composite has bounced back by 13 per cent. The direction of the ASX has tracked the rocky path of China's market over the past month. Aberdeen Asset Management head of fixed income Nick Bishop agreed that outflows of Chinese money in the years ahead is likely to have a far greater impact on global financial markets than the recent rise in inflows of offshore capital into China. "China is a nation with a huge balance of household savings, because there has been no social safety net. Don't discount the ability of Chinese money to flow offshore and push up global asset prices, even if the economy slows down more than expected." Mr Bishop said the biggest risk out of China would be a change in direction from policymakers. "But we expect the authorities to continue to react to market volatility in a way that balances the challenges of the nation's structural reform push and plans to open up its financial markets with managing slower growth." According to data from the National Bureau of Statistics, China is on track to achieve its official economic growth target of 7 per cent in 2015, down from growth that was in excess of 10 per cent a few years ago. "The official figures show China is still growing at 7 per cent, although it feels a lot weaker," Mr Halmarick said. Many fund managers are sceptical of the accuracy of data released by the Chinese state, but it is nevertheless a pretty reliable indicator of relative changes, he said. "If all of a sudden the official statistics start saying Chinese growth has slowed to 5 per cent then we'll know we're in trouble, but I don't think that is likely." Macquarie Asset Management head of fixed income Brett Lewthwaite said the slowdown in China is being well managed by the state and tipped a "soft landing". After all, China has the advantage of being governed by a centralised government with a 10-year fixed term. That makes it easier for policymakers to stick to their long-term reform plans, despite setbacks caused by periods of turmoil. "Nobody ever said the liberalisation of Chinese markets was going to be easy," Vanguard Asia Pacific head of investment strategy Jeffrey Johnson said. Tuesday, July 21 2015
Selling your old home at the same time as buying a new one can be challenging as it’s difficult to know where to start. It might seem obvious, but the number one thing people overlook is actually finding out the full costs of a move including what they can afford and how much a lender will be prepared to lend them. People often get so caught up in the emotion and excitement of looking for their perfect home that they overlook the financial realities and costs of such a move. There are a multitude of factors and costs that come into play when changing properties many which most people don’t anticipate. This often means people find themselves caught in a bit of a bind at the 11th hour and often have to wear a lot of unexpected costs to proceed and end up with a more expensive loan than they anticipated. Not a great start to something that was meant to be a positive experience. Getting a proper financial evaluation up front before you start looking means you can get a much clearer understanding of what your options are and the implications of different scenarios. One of the tools we use for our clients is our Property Changeover Calculator. This allows us to assess the outgoing and incoming costs associated with a move so a client has a better understanding of their end financial position and likely ongoing costs. We can also explore a range of “what if?” scenarios to assess the impact of different sales and purchase prices. This means our clients are better informed upfront, and means we can determine the appropriate structure for their needs before they proceed. Contact us to discuss your next move or even just to get a financial check up Tuesday, July 21 2015
Valuation firm Herron Todd White has just released it's latest national property clock and has identified Brisbane as a market on the rise. This is consistent with the view of a number of independent researchers including BIS Shrapnel which have pegged Brisbane for growth over the next few years. Related articles Friday, July 17 2015
A surprise interest rate cut in Canada and the prospect of a similar move next week in New Zealand have stoked speculation the Reserve Bank of Australia will follow suit later this year. While the Reserve Bank remains reluctant to cut rates again, the direction taken by two of governor Glenn Stevens' closest global peers helped send the Australian dollar to a six-year low of US73.54¢ on Thursday. The Bank of Canada's cut its benchmark interest rate to 0.5 per cent on Wednesday. The RBA is expected to sit on its hands for a few more months yet, but it is also hard to see how the underlying terms of trade dynamics and mining capex unwind result in anything but persistent sub-trend growth, stagnant wages, and ultimately a lower cash rate. "That sounds very similar to what's happening here in Australia," he said, alluding to the Reserve Bank's repeated call for more "non-resources" economic growth.
Citigroup expects the Reserve Bank to remain on hold next month but cut the official cash rate from its current record low of 2 per cent to 1.75 per cent in November. "What hopefully we'll see come our summer is that the US recovery has enabled the Fed to tighten, that's lifting the US dollar, that's helping other people depreciate and the rest of the world to ride on the US economy's coat-tails." Tuesday, July 14 2015
Buying an older property can be like buying an older car. Sure you might get it at a cheaper price but that doesn't't mean you will get a better return over the long term. There's a number of factors that could turn your bargain buy into an expensive lesson. Repairs Yes you can claim a deduction but you don't get all of that outlay back. If your income is $80,000 only 32.5% so you still have to front up with rest. Structural issues With a new property it is certified at various critical stages to ensure it meets current building codes and standards. PLus new properties come with a 6 year structural warranty. Depreciation Tenants and rent So cheap does not equate to good. And a cheaper price does not mean the house will be cheaper to run. Contact us to discuss your property investment strategy. Friday, July 10 2015
According to onthehouse.com.au Queensland comes out on top for high-yielding and still growing suburbs. Of 56 suburbs across Australia where the average rental yield surpasses five per cent and the capital growth predictions are at least three per cent for the next eight years Queensland suburbs make up 41 per cent of the list with 23 suburbs appearing. Affordability is a main contributor to high rental yield rates, with 75 per cent of the suburbs on the list having median values below the national median of $491,000 for houses and $452,500 for units. The median house value in Brisbane sits just below the national median at $484,500, while in Sydney the median house value is almost double that at $961,000. Friday, July 03 2015
Recent data is showing that vacancy rates are rising and as we have discussed previously there is a building over-supply of units in inner city Brisbane This means you need to ensure the rental property you purchase attracts good quality tenants and does not remain vacant for long. This means putting aside property features that may appeal to you as an owner-occupier and buying with a tenant in mind. Check your emotions at the door Buying new Easy access to employment hubs, schools, sports and leisure facilities Vacancy history and trends The right property manager Wednesday, July 01 2015
Brisbane is the only capital city tipped to buck the national trend of easing median house prices in real terms over the next three years, according to housing forecasters, BIS Shrapnel. But its housing market outlook has warned of a looming oversupply of inner city Brisbane apartments. The BIS Shrapnel Residential Property Prospects 2015 to 2018 puts Brisbane's estimated median house price in this year at $520,000, which researcher Angie Zigomanis said that was still below Brisbane's June 2010 peak in real terms. Coupled with low interest rates, Brisbane's affordability was at levels seen in the early 2000s. A total rise of 13 per cent in the Brisbane median house price is forecast over the three years to 2018, while the median unit price is forecast to rise by a total six per cent. Its new dwelling supply overall, without any significant rebound expected in population inflows, was set to move the Brisbane apartment sector nto ioversupply, "with some impact across the broader market." But significantly, Brisbane is tipped to be the only capital city that will not experience a decline in median house prices in real terms in the next three years. Nationally low interest rates will support further price growth in undersupplied residential markets in 2015/16, but the spectre of tightening interest rates and deterioration of affordability will create conditions for price declines in a number of cities from 2017, according to the forecaster. "But doomsday predictions for the residential market are likely to be overblown. "Although Australia’s residential property markets are forecast to steadily weaken from 2016/17, as a combination of rising supply and the prospect of a tightening in interest rate policy impacts on prices, any downturn will be similar in magnitude to that seen over 2011-2012." According to the company’s Residential Property Prospects, 2015 to 2018 report, Sydney and (to a lesser extent) Melbourne have broken away from the other capital cities, with both estimated to have recorded double-digit percentage rises in their median house prices in 2014/15. Solid population growth, reasonably positive economic conditions and an underlying dwelling deficiency have underpinned this rise, and affordability is increasingly becoming a concern. In contrast, weaker recent price growth in the other capital cities means that affordability is not as strained, and it is subdued local economic conditions and/or an underlying excess dwelling stock that have impacted the market. “Most capital cities are building apartments at record rates, driven by investor demand,” said Zigomanis. “As these projects are progressively completed, strong tenant demand will be required to support rents and consequently values upon completion. He noted the detached house market is less reliant on tenant demand and more exposed to owner occupiers. Together with the stimulatory effect of variable interest rates at more than 40-year lows, this is expected to support median house prices in most capital cities over 2015/16. The strongest conditions over 2015/16 are forecast for New South Wales, Queensland and Victoria, where BIS Shrapnel estimates the markets are in overall deficiency at June 2015. Wednesday, June 24 2015
Investing should be viewed like a business. At the end of the day it's all about the numbers. But I often meet with people who are wanting their investment to act as a solution for personal issues. When you start doing this you end up with an underperforming investment. The one I often hear is people wanting to buy an investment property that someone they know can live in. Often it's parents wanting to buy something for the kids. Or it can be for a family member or friend. There are a range of issues with this. The most significant is you are using a long term investment vehicle to solve a short term problem or issue. You are picking an area based on where the kids want to live or near where they work without actually researching to see whether the area is a good place to invest - what are the growth prospects like? what is the employment outlook? what are the supply side risks? what's happening with vacancies? what is rental growth like? what point of the price cycle is it at? So what happens? A year or so down the track the kids change jobs, meet someone, move interstate or oversees, or just decide they want to live somewhere else. And you're left with a property that is meant to perform for you over the next 20 or 30 years. And if boughta based on emotion and personal reasons there's a good chance you've bought something that is an underperformer. Investing and personal purposes should be keep strictly seperate. Let the kids sort it out for themselves the same way you did. They'll whinge about how expensive property is - just like you did. And whether you believe it or not they will still find a way to buy their own home the same way you did. If you want to help your kids encourage them save and budget and give them the skills. |