C&G on the RBA Announcement for May

Filed under Market Updates, News, Real Estate News by on May 16, 2013 at 9:51 am {no comments}

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For the first time since December 2012 the Reserve Bank of Australia have cut our national cash rate by .25 per cent. Interest rates currently stand at 2.75 per cent, setting a 50-year record low for the Australian cash rate. Compared with many other nations, interest rates in Australia are still considerably stable (and high). Economists view May’s rate-cut announcement as unexpected – yet they are a welcome relief for a number of local industries who have seen their returns drop or stall quarter-on-quarter. Today’s Chisholm & Gamon blog takes a look at motivation behind the RBA’s May decision – and how this change may affect home owners and mortgagees.

The decision to drop interest rates has been welcomed by the Australian public, as is generally the case whenever an extra amount of disposable income becomes available in a household’s budget. The RBA hopes May’s rate cut will provide the ‘breathing room’ to encourage domestic spending and a subsequent boost in the economy. The property market is one industry sure to see increased demand and competition, with many first home owners now taking advantage of fixed rate opportunities when rates are at record lows.

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The effect of rate cuts over the past 18 months is beginning to slowly filter into the national economy.  Experts believe the effects of prior interest rate cuts have taken longer to ‘flow down’ into the wider economy than expected – which is further motivation for May’s discount. Slow growth in almost all national industries has continued in 2013, and interest rate cuts are primarily seen as a way to stimulate the consumer into spending, the investor into investing, and the business owner into further employment. Unemployment rates are also expected to drop due to May’s rate cuts.

The RBA have continued to take note of the international economic climate, identifying that China is stable and America continues to slowly improve. Despite growing global stability, further rate cuts may be on the horizon with a federal election coming in September. The RBA will continue their conservative monetary policies – as it is desirable to leave room for movement to adapt to any economic unpredictability in future.

The final word on the May monetary announcement is that prospective property buyers should consider making a move.  Favorably low interest rates simply won’t be available to forever – they’re merely a short-term strategy for greater economic prosperity. If buying is on your agenda – the ball is in your court.

Chisholm & Gamon On April’s 2013 RBA Monetary Report

Filed under Market Updates, Real Estate News, Research by on April 8, 2013 at 4:51 pm {no comments}

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Last week the Reserve Bank of Australia released their monetary policy report for April 2013. Interest rates are left unchanged, remaining at a competitively low 3 per cent. The RBA’s decision means that Australians will benefit from another month with a record low cash rate. Since the 0.25 per cent reduction in December 2012, the cash rate has remained unchanged. How might things alter in future? International economies and domestic spending will surely influence decisions throughout the remainder of 2013. C&G report.

As noted by Governor Glenn Stevens in previous months, the RBA’s most recent decision has been heavily influenced by the economic circumstances of China, the USA and Europe. Europe continues to operate in a recession-like environment without any promising signs for change in the near future. Italy, Greece, Spain and Cyprus are far from robust members of the EU currently. It’s not all bad news however – America has shown slow, consistent economic improvement. China is the envy of all nations, continuing to show signs of unprecedented growth. Since March, there haven’t been many ‘status changes’ to economies globally.

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Internally, there have been some changes to the spending habits of Australians, including moderate growth in private consumption. A return to the vibrant consumer confidence and purchase of luxury goods experienced pre-GFC is not likely in the short term, however – with spending on-par with 2012’s records to date. The property market is steadily displaying signs of growth with rising dwelling prices and high rental yields. In relation to foreign trade, the export and mining industries continue to prosper.

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While it seems like this economic news is similar to that reported in the past, RBA Governor Glenn Stevens notes that interest rate cuts in 2012 have had the desired effect. The outlook for Australia’s economy is generally positive with healthy employment rates, a strong dollar and expected further growth in the coming years.

Economic commentators are not expecting an interest rate change next month. With inflation close to the middle of the RBA’s target range, there is a chance rate cuts may be made later in the year – providing that there are no major incidences in exterior global economies.

Keep On Keepin’ On: C&G on the Reserve Bank of Australia March Monetary Report

Filed under Market Updates, News, Real Estate News by on March 14, 2013 at 9:47 am {no comments}

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The Reserve Bank of Australia has made its March monetary policy statement, opting to keep rates unchanged at 3.0 per cent. This current cash rate is a record Australian low, which explains why the RBA may be standoffish about further interest rate reductions. Our national cash rate has remained the same since our last 0.25 per cent reduction in December 2012. Influential factors to take into consideration include the global economy, public spending and growth trends locally. Many forecasters are predicting a rate to drop to 2.25 per cent by the year’s end. C&G reports on what this means for home owners and those wishing to acquire a property in the near future.

The RBA last week released their monthly statement, with Governor Glenn Stevens explaining that the financial climates in China, Europe and the USA have been a major focus for the board in March. The USA has shown positive signs of growth while Europe is also in a better position than at this time last year. Meanwhile, China is continuing to grow at a rapid rate.

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The report also identified that there has been moderate growth in the local economy with the housing market on the rise, paired together with an increase in employment opportunities. Public spending’s forecast is not so bright, with budgetary constraint likely to continue. Exports of resources have also strengthened throughout February, and the Australian dollar raised half a US cent to $101.81 the day prior the RBA’s monetary policy announcement. The board has reported that spending trends and inflation have remained consistent with predictions.

percentWhile some homeowners may be disappointed with the RBA’s decision, economists believe the banks may still implement a 0.25 per cent interest rate cut in an attempt to attract new mortgagees. Even if this is not the case in the immediate future, many pundits expect rates will fall to 2.25 per cent by the end of the year.

Confidence in the RBA’s monetary policy direction is high, with commentators praising the actions of the board in light of Australia’s relative economic health in the wake of the GFC. The population at large seems to be buoyed by the positive reports of 2013 – we’re enjoying unprecedented numbers through open for inspections – a sign that the property market is back and stronger than ever. Now is certainly the time to take stock and plan to purchase – or perhaps upgrade to a new residence – before the property market’s inexorable upwards climb begins again.

Strong Market Signalled by RBA Rate Announcement

Filed under Local Community, Market Updates, News, Real Estate News by on February 7, 2013 at 10:38 am {no comments}

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While some soon-to-be first home owners may have groaned when their hopes of an interest rate cut this month were dashed by the RBA’s Governor Glenn Stevens, many in the finance community noted the decision to hold our interest rates steady at 3% as a step in the right direction, and an indication of stability. Today, C&G write on the positive stance taken by the RBA in anticipation of a strong market for 2013.

2012 was a year that involved watching and waiting for many aspirant and current property-owners. Who would move first? Market expectations or market forces? The RBA observed the economy carefully last year, responding with a series of interest rate drops from 4.25% down to our current (historic) low of 3%. The Australian dollar remains high – something unlikely to change until our northern neighbours in America and Europe fully address the economic challenges they face. That said, both Europe and the US are working through their issues – America in particular bringing down deficits effectively. China is beginning to re-invest in Australian iron, with exports strong for the last quarter paired with a 6% increase in price per tonne. Inflation is controlled at 2-3% (acceptably within forecast) – the RBA’s major concern is in relation to employment. Australia’s wages continue to be high, making our exports far from competitive and restricting the growth of small business growth. It’s not all bad news though – happily, residential investments have grown (particularly for units) in capital cities across the board. The RBA’s ‘wait and see’ approach for February should be interpreted as a sign of confidence. Although the economy has improved, the RBA will wait to see the full ‘trickle down’ effect of 2012’s rate cuts before considering any further discounts to the cash rate.


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More locally, the bayside areas of Melbourne are enjoying strong consumer demand. With the property market far from over-supplied, Chisholm & Gamon are anticipating a busy and successful tail end to summer real estate sales. Many economists suggest a further two rate cuts over 2013, whilst UBS predict a rate cut in March (touting a 62% chance of one, in fact!) Regardless of further cuts, the home buyer has returned to market in 2013 hungry for the opportunity to purchase before rates begin their inexorable climb upwards, locking them out of blue chip suburbs which grow in value annually. Remember – it’s not about timing the market – rather, investment successfully centers around purchasing intelligently and spending time in the market.

Overseas Property Prices

Filed under Market Updates, Real Estate News by on March 8, 2012 at 5:27 pm {no comments}

With so much attention focused on the local property market at the moment, let’s take a glimpse at some international house prices. According to the Global Property Guide, the top of the real estate price list is dominated by the world’s heavy weights. These include London, New York, Paris and Rome, ranging in price from $9810 (Rome) to $20,654 per square metre (London). Rumor has it that last week an apartment in Manhattan was sold to a young Russian woman for a record $88 million. Imagine the mortgage repayments on that kind of bank loan!

At the very pinnacle of global property prices, however, is the glitzy Mediterranean city of Monte Carlo, Monaco. $53,612 per square metre is needed to secure a home among the royalty there. Even with our favourable exchange rate it sounds like a lot of money!

At the other end of the price scale, property in the largest city in Tanzania, Dar es Salaam, will set you back $700 per square metre, while Kenya’s capital Nairobi demands $900 per metre.

Elsewhere, homebuyers could purchase a plot in the Egyptian capital for just over $1000 per metre, own a property on the Dalmatian Coast in Croatia for less than $3000 per metre or pitch across the ditch in Auckland for around $4600 per metre, according to the Guide.

Australia ranks among the world’s top 20 richest real estate spots. Of almost 100 major cities worldwide Sydney ranks 13th most expensive city to buy an apartment. That cost is around $8838 per square metre. Our other capital cities were not mentioned.

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