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The median price for a Perth house will pass $600,000 within three years as the city’s property market reclaims its title as the strongest and fastest growing in the country, a new report predicts.

The BIS Shrapnel residential property report forecasts house prices in Perth will climb an average 7 per cent a year for three years, pushing the median price to $610,000 from $500,000 today.

No other capital is expected to enjoy such strong capital growth, with even higher interest rates unlikely to slow the Perth market as much as others.

Senior project manager Angie Zigomanis said even though the Perth market slowed before other cities in 2007, conditions were improving on the back of another resources boom. Money flowing from commodities would soon push up house prices across Perth.

“With prices below peak levels in real terms and income in Perth set to grow substantially as the next round of resource expansion projects get up and running, solid price growth should continue,” he said.

“Nevertheless, further increases in interest rates will prevent the boom in prices that we saw in the last upturn.”

Mr Zigomanis said the median house price would climb 22 per cent by the middle of 2013. This growth would be quicker if the Reserve Bank did not increase interest rates in the next six to 12 months.

Growth at that rate would surpass other capitals such as Sydney (up 20 per cent), Melbourne (11 per cent), Brisbane (12 per cent), Adelaide (20 per cent), Hobart (12 per cent), Canberra (14 per cent) and Darwin (12 per cent).

House prices climbed rapidly through the second half of last year and into the first four months of this year.

Mr Zigomanis said this was directly because of record low interest rates in response to the global financial crisis and a “pull forward” of demand from the first-homeowner’s grant. Not only would house prices outpace inflation, they would affect rents.

“Even though overseas migration inflows are steadily easing, a deficiency of stock is still in place with dwelling construction below underlying trend,” he said.

Recent Australian Bureau of Statistics figures show a fall in loans for people buying homes but an increase in loans for investment properties. Financial market analysts do not expect official interest rates to rise until May next year.

source  :  www.thewest.com.au

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The Reserve Bank has delivered some badly needed relief to mortgage holders, deciding today to leave official interest rates on hold.

For the first time since February, the RBA board did not use its monthly meeting to lift rates which now stand at 4.5 per cent.

In a statement, bank governor Glenn Stevens said the issues around sovereign debt in Europe and its impact on financial markets were a major reason behind the move.

He said the impact of these on the wider economy were still to be determined, arguing global growth is still expected to be around trend for the rest of this year.

But Mr Stevens signalled interest rates were likely in the future on the back of the return of the mining boom.

“In Australia, with the high level of the terms of trade expected to add to incomes and demand, output growth over the year ahead is likely to be about trend, even though the effects of earlier expansionary policy measures will be diminishing,” he said.

“Inflation appears likely to be in the upper half of the target zone over the next year.

Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago.”

The decision followed new figures from the Australian Bureau of Statistics which showed retail sales growing 0.6 per cent in April and a 14.8 per cent collapse in dwelling approvals.

However, the retail sales – while stronger than expected – were pushed up by food sales which jumped 1.3 per cent. Once this sector, which accounts for 40 per cent of all sales, is excluded retail was up just 0.1 per cent.

Other ABS figures showed government spending is holding up the economy and will add about 0.8 percentage points to tomorrow’s GDP result. Without that burst, the economy may have actually contracted in the March quarter.

CommSec chief equities economist Craig James said the figures showed the RBA had no option but to leave rates where they are for some time to come.

“Given the latest round of data, there are good reasons for the Reserve Bank to leave rates on hold for the next few months,” he said.

“Not only are retail sales holding at very weak levels, but the housing sector is showing signs of consolidation.”

Treasurer Wayne Swan says the Reserve Bank’s decision to leave the official cash rate unchanged is a “welcome relief”.

“This news will be welcome relief to Australian families and businesses around the country, who are of course doing it tough,” Mr Swan told parliament minutes after the decision was announced.

The national accounts for the March quarter are due for release on Wednesday.

“I have every confidence that with right polices in place, our economy can continue to be one of the best in the world over coming years,” Mr Swan said. Consistent with that outlook, and as a result of actions at previous meetings, interest rates to borrowers are around their average levels of the past decade, which is a significant adjustment from the very expansionary settings reached a year ago.”

“Not only are retail sales holding at very weak levels, but the housing sector is showing signs of consolidation.”

“Source  :  www.thewest.com.au

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Business has warned that West Australians could be priced out of the resources boom and interest rates pushed even higher if the Federal Opposition follows through with a promise to slash the number of immigrants.

WA Chamber of Commerce and Industry chief economist John Nicolaou said the flagged cut would mean the abandonment of major developments by companies unable to find the workers they need to exploit the State’s natural resources.

He was backed by Trade Minister Simon Crean who said cutting immigration now would devastate economies like that of WA and Queensland which were crying out for workers.

The Opposition has signalled cutting the net immigration intake which, when temporary workers and students are taken into account, edged down to 297,000 in the three months to the end of September.

Shadow immigration minister Scott Morrison said forecasts of Australia’s population reaching 36 million by 2050 proved immigration under the Rudd Government was “out of control”.

He said a coalition government would bring immigration levels back to a “sustainable level”.

But Mr Nicolaou said with WA needing 400,000 people over the coming decade to deal with the resources boom, cutting immigration levels could prove economically disastrous to the State.

He said major resource companies would go overseas if they could not get the labour they needed in Australia.

Those that did continue work in WA would have to pay higher wages for their staff, which would then push up costs for the rest of the community.

“I think it’s very short-sighted if they’re looking at cutting immigration, because it’s going to push up costs for everyone through wages going up,” he said.

“We lost investment in the last boom because there were insufficient workers, and we run the risk of doing that again.”

Professor Peter Mc Donald of the Australian Demographic and Social Research Institute also warned that trying to cap immigration levels would have major economic ramifications for people already living in Australia. The Reserve Bank was already lifting interest rates to dampen demand.

“You’re just going to push up wages pressures and that will feed into higher interest rates,” he said.

Mr Crean said the resource States would be disadvantaged if the number of workers was artificially restricted.

“Mining companies generally are saying one of the biggest challenges they face … is the availability of skilled labour,” he said. “People calling for cuts to immigration programs ought to understand how the economy is functioning.” 

Source  :  www.thewest.com.au

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Homeowners face finding another $50 a month to pay the mortgage, with the Reserve Bank tipped to lift official interest rates again today as it battles to dampen house prices and keep inflation pressures at bay.

A quarter percentage point rise this afternoon would mean official rates would have climbed 1.25 percentage points since October, adding more than $240 to the monthly repayments on a $300,000 mortgage.

It would be the biggest run of increases in a 12-month period since the Reserve took the official cash rate from 5 per cent to 6.25 per cent between November 1999 and August 2000.

But the decision could be a close call, with signs of softness in the retail and building sectors lifting expectations the Reserve may wait at least another month before moving in the week before Treasurer Wayne Swan hands down the Federal Budget.

At least mortgage holders may be saved from a “super-sized” lift to their repayments, with the NAB yesterday saying it would not increase its rates more than any move in the official cash rate. Its recent policy of matching rate rises had led to more customers.

That prompted Mr Swan to challenge other major banks to follow NAB’s lead.

TD Securities senior strategist Annette Beacher expects the Reserve board to hold rates today.

But Macquarie Bank rate strategist Rory Robertson said the chance of a rate rise was about 80 per cent.

“Interest rates here remain unusually low, our jobs market is strengthening, China and bulk-commodity prices are booming, so, too, local home prices, and the world’s biggest economy increasingly is getting back on its feet,” he said.

A new survey from Dun and Bradstreet of business executives out today shows sales, growth, employment and capital investment expectations all rising. 

Source  :  www.thewest.com.au

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Reserve Bank governor Glenn Stevens has signalled interest rates are on their way back up with mortgage rates likely to edge up between half and a full percentage point.

Giving evidence to the House of Representatives economics committee in Canberra, Mr Stevens said the RBA’s focus continued to be on what mortgage rates were offered by commercial banks rather than on the Reserve’s official cash rate.

He said given the commercial banks had lifted rates over and above what the RBA had done, there was still about a half and a full percentage point to go before mortgage rates were back to what the Reserve would consider close to their long term average.

“There’s a little distance to go yet before I think you could characterise the setting of interest rates as normal or average,” he said.

The RBA surprised markets by leaving official rates on hold at its February meeting.

Mr Stevens said on top of the Reserve’s own lift in official rates, the commercial banks actions had effectively delivered three and a half interest rate rises to mortgages cases, and in the case of Westpac customers, four rate hikes.

He said one of the advantages of lifting rates as the RBA did in the last three months of 2009 was that it could hold rates in February and get a clearer picture of how the economy was travelling.

“You get that luxury when you can wait a little a bit further down the line,” he said.

Mr Stevens said Australia had performed much better than even the RBA had expected out of the global recession.

But he warned that meant the economy was now heading into an upswing stronger than otherwise would have been the case.

“With the economy having had only a mild downturn with begin the upswing with less spare capacity than would typically be the case after a recession,” he said.

“There’s less scope for robust demand growth without inflation starting to rise again down the track.

“Monetary policy must be careful not to overstay a very expansionary setting.”

Mr Stevens said the resources sector in particular was looking to grow quickly, with the terms of trade likely to head back to the record highs seen in 2008 this year.

He also highlighted the strength of Australia’s sovereign debt position, hosing down fears the country was carrying too much debt.

“Australia’s position is by any measure very strong indeed,” he said.

The governor also played down fears raised by Opposition finance spokesman Barnaby Joyce that Australia could default on its debts.

Mr Stevens said Australia had never defaulted before and there were no signs it would now.

“I very much doubt there ever will be,” he said. 

“Monetary policy must be careful not to overstay a very expansionary setting.”

Mr Stevens said the resources sector in particular was looking to grow quickly, with the terms of trade likely to head back to the record highs seen in 2008 this year.

He also highlighted the strength of Australia’s sovereign debt position, hosing down fears the country was carrying too much debt.

“Australia’s position is by any measure very strong indeed,” he said.

The governor also played down fears raised by Opposition finance spokesman Barnaby Joyce that Australia could default on its debts.

Mr Stevens said Australia had never defaulted before and there were no signs it would now.

“I very much doubt there ever will be,” he said.

Source www.thewest.com.au

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THE average new mortgage in Australia has hit an all-time high of $367,000 according to mortgage broker Australian Finance Group.

But Queenslanders have been more conservative than the rest of the country, with the average new mortgage in Queensland sitting at $325,000.

The average home loan in New South Wales is now $433,000; in Western Australia it is $391,000 and $386,000 in the Northern Territory.

Australians have been increasingly taking on bigger mortgages, with the average new home loan 6.4 per cent larger than it was in May 2009.

Queensland bucked this trend, however, with new mortgages taken out in November $10,000 smaller than the previous month and close to the state’s January low of $323,000.

Home loans in both Victoria and New South Wales grew since May – up 12.1 per cent and 10.7 per cent respectively.

The news comes after the Reserve Bank of Australia announced on Tuesday that it was lifting the official cash rate for the third successive time.

The latest 0.25 per cent rise, when passed on by lenders, will cost home-owners with a $367,000 mortgage on a standard variable rate an extra $56 a month, while those slugged with a 0.45 per cent rate hike face an increase of $102 per month.

First-home buyers accounted for just 13.7 per cent of all new mortgages in November, down from their peak of 28.1 per cent in March.

Investors have been steadily returning to the property market over the past four months and represent a third of all new mortgages in November.

Of those who took out a new mortgage in November, only 2.1 per cent opted for a fixed-rate, down from 3 per cent the previous month.

Total numbers of new mortgages were lower than previous months.

Mark Hewitt of Australian Financial Group said: “October and November are seasonally strong months in the calendar, but we’ve seen two straight months of decline.

“Larger average mortgages and greater activity by investors are usually signs of a confident market but confidence is still fragile.

“We believe the RBA hiked rates too quickly and too soon.”

Source  :  www.thenews.com.au

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There’s more pain on the way for Australia’s borrowers with the Reserve Bank today raising interest rates for the third time in as many months.

As widely tipped, the central bank lifted its key cash rate by 25 basis points to 3.75 per cent following its monthly board meeting. It’s the first time the RBA has lifted rates three months in a row. (Click here for economists’ reaction, including Michael Pascoe and Peter Martin.)

”In Australia, the downturn was relatively mild, and measures of confidence and business conditions suggest that the economy is in a gradual recovery,” RBA Governor Glenn Stevens said in a statement accompanying the rates verdict. The central bank’s ”gradual” increases in rates will ”work to increase the sustainability of growth in economic activity,” he said.

For a typical mortgage holder on a $300,000 mortgage, today’s rate rise will add about $47 to monthly repayments, assuming commercial banks match the RBA’s move. Officials for most of the major banks this afternoon said their rates policies were under review.

The Reserve Bank has made regular public comments in recent weeks that it sees no need to keep interest rates at ”emergency” levels as the economy rebounds from a slowdown during the past year. Ric Battelino, the RBA’s deputy governor, last week said the economy’s growth is likely to extend ”for a few more years yet.”

More to rises come

Still, the economic data continue to provide mixed readings. A measure of manufacturing activity in November out today showed the sector continues to grow with companies adding jobs, although the stronger Australian dollar slowed the pace of expansion.

Overall building approvals, meanwhile, surprisingly fell 0.6 per cent in October, according to other figures out today. A 5 per cent gain in approvals for private homes was countered by a 19 per cent drop in permits for flats and townhouses.

Even with today’s rate increase, the Reserve Bank’s efforts to tighten monetary policy are likely to be far from over.

”The big change in this statement was their reference to the increases so far as being material,” ANZ’s head of Australian economics Warren Hogan told Reuters.

”I read that as implying that they’re ready to now sit back and watch how these increases affect the economy. And the hurdle for further rate hikes will be much higher than we have seen so far.

“So I think our view that they’re going to 4 (per cent), 4.25 then sit there for much of the year is the right one. There’s every chance they’ll do it in February and March, although I wouldn’t be surprised if it’s dragged out over a number of months.”

JP Morgan’s Chief Economist Stephen Walters agreed that the RBA may make it four rate rises in a row: “With inflation likely to creep up, and the worst in the economy having passed, there is no need to keep rates at very expansionary levels.”

“We think they will again lift rates in February,” Mr Walters

said. ”The RBA does not meet in January, but I think they will hike when they return after the break. The word ‘gradual’ is still there in the RBA statement and I think they will start going slow in lifting after February.”

Before today’s move, investors were betting that rates would rise to at least 4.75 per cent in a year’s time – equivalent to four more rate rises over the period. Three weeks ago, however, the betting was for rates to rise to 5.25 per cent, indicating confidence in the economy’s strength has recently diminished.

The RBA’s board is not scheduled to meet again until next February.

Political view

Treasurer Wayne Swan said the rate rise would pinch household funds.

”This is tough for families…when rates go up it has an impact on the family budget,” Mr Swan told reporters.

He took aim at old comments from new Opposition Leader Tony Abbott that the government’s billion-dollar stimulus had led to interest rates rises.

”That is laughable and it comes from a political leader who is prone to making erratic statements,” Mr Swan said.

”Mr Abbott is in denial of the fact that this country has performed well in the global recession.”

Even with the latest jump, these rates were last seen in 1967, Mr Swan said.

Mild downturn

A year ago, the Reserve Bank was in the midst of a series of deep interest rate cuts as Australia joined other countries in attempting to limit the damage from the global financial crisis.

Last December, the RBA sliced one full percentage point from its cash rate, lowering it to 4.25 per cent on the way to a fifty year-low of 3 per cent by April. After a pause, the central bank has started to lift rates back towards more normal levels as fears of an economic crunch abate.

”The effects of the early stages of the fiscal stimulus on consumer demand are fading, but public infrastructure spending is starting to provide more impetus to demand,” Mr Stevens said in his statement today.

The jobless rate has been one of the surprises, with Australia’s unemployment holding well below 6 per cent when many had predicted a level in excess of 8 per cent. Business investment has also held up well in large measure due to the sharp rebound in China and India – leaving Australia as one of the few countries to start raising rates.

”Prospects for ongoing expansion of private demand, including business investment, have been strengthening. There have been some early signs of an improvement in labour market conditions,” Mr Steven said. ”The rate of unemployment is now likely to peak at a considerably lower level than earlier expected.”

The RBA believes economic growth ”is likely to be close to trend (in 2010) and inflation close to target.

Market response

In the aftermath of the rates news, the Aussie dollar initially dropped before recovering to about 91.5 US cents in recent trading, close to its level before the RBA statement.

Shares, also turned mildly lower before recovering to be about 0.2 per cent higher for the day with less than an hour of trading left.

Source :   www.theage.com.au

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