Feb 26, 2020
What’s ahead for property this year? Is this the end of interest rate cuts?
We started this year with optimism, but now we have our fair share of turbulence. We have the coronavirus epidemic, the bush fires, political tensions overseas.
How will these affect our property markets and our economy?
Those are some of the things we’re going to talk about today with Dr. Andrew Wilson.
We’re also going to discuss auction trends, the home loan trends, what’s happening to interest rates, and what’s happening to inflation, as well as employment, consumer confidence, and our housing markets.
There’s a lot of information in this episode that will make you a more informed property investor.
We’re just over 10% into the year 2020, and we’ve already had our share of X factors that have upset the forecasts.
Let’s start with property trends. A number of data sets are suggesting property values have continued rising around Australia.
The property upturn which started in Sydney and Melbourne in the middle of last year has become more widespread with housing values rising in January across every capital city.
There’s plenty of competition among buyers. There are not only higher clearance rates, but there are also higher numbers of properties being offered for sale.
Median prices are growing strongly, but they’re a bit of a lagging indicator. Auction clearance rates are a more in-time indicator of market sentiment and depth.
Home loans surge
A lot of fuss has been made of the December home loan figures which confirm the revival of our housing markets. However, they still remain well below the figures of 12 months ago, particularly for property investors.
On the other hand, ending for first home buyers went against the trend, increasing by 4.6% over 2019 compared to the previous year.
Is this the end of rate cuts, or are the RBA just holding off?
The Reserve Bank of Australia decided in the first week of February to keep interest rates on hold.
The board noted that previous outbreaks of new viruses had "significant but short-lived negative effects" on economic growth in the economies at the centre of the outbreak.
Headline Inflation rising - but still subdued
Headline inflation was up to 0.7% for the quarter, and the annual rate of inflation sits at 1.6%, which is significantly below the 2-3% target range the RBA is aiming at.
More economic headwinds – tragic bushfires and coronavirus.
The Australian economy posted its worst performance since the global financial crisis in 2019.
The big macro stories affecting our economy have come so far this year have been:
The coronavirus is creating a second wave of economic disruption in Australia.
The RBA minutes stated that the coronavirus will have a bigger impact on the Australian economy than SARS.
Good news for employment
Unemployment fell at the end of last year to 5.1%.
But there is still spare capacity in our labor markets with many people who are in part-time jobs being underemployed.
A slump in job advertising over the past year and slow economic growth suggest the unemployment rate could go even higher.
Three interest rate cuts and reductions to personal income taxes have failed to lift the mood of consumers, who appear more content in paying down debt and saving rather than spending the increase to household incomes.
Business confidence is also weak as business conditions struggle below average, raising the risk of slowing employment growth and continuous sluggish business investment.
Our Housing Market
Our forecasts for 2020 are that property values will be higher at the end of the year than today with well-located Sydney and Melbourne properties worth 10% more than they are today.
Links and Resources:
Metropole’s Strategic Property Plan – to help both beginning and experienced investors
Join us at my annual Property Market and Economic Update – come as my guest using the Coupon Code: PODCAST Click here for details
Show notes plus more here: What’s ahead for property this year? How will the corona virus affect our economy?
Some of our favourite quotes from the show:
“Auction clearance rates are a more in time indicator of the market.” – Michael Yardney
“In the context of what’s happening in the world, those aren’t bad economic figures if we could achieve them.” – Michael Yardney
“I guess the elephant in the room is the coronavirus. It’s still a developing story and even the RBA stated in its minutes that it will have a bigger impact on the Australian economy than SARS.” – Michael Yardney
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