Economists believe a rate rise next week is a near certainty after a rise in the cost of living in the final three months of last year. Australia's headline consumer price index (CPI) rose 0.5 per cent in the December quarter, for an annual rate of 2.1 per cent, the Australian Bureau of Statistics (ABS) said on Wednesday.Fruit, holidays, beer and house prices all rose, but were offset by lower petrol prices (lower petrol prices?gee folks, I must have missed that one!). Electrical goods and pharmaceutical prices also fell. The trimmed mean CPI rose 0.6 per cent in the December quarter, for an annual growth rate of 3.2 per cent.The weighted median CPI rose 0.7 per cent in the December quarter, with an annual rise 3.6 per cent.The median market forecast was for the headline CPI to have risen by 0.4 per cent in the December quarter, for an annual pace of 2.0 per cent.Economists had expected the average of the two underlying measures of inflation to rise by 0.6 per cent in the December quarter, for an annual pace of 3.35 per cent.The ABS calculates the trimmed mean and weighted median measures on behalf of the Reserve Bank of Australia (RBA), which uses them to gauge the underlying trend in inflation.
Unlike the headline CPI, the RBA's underlying measures are subject to revision due to the seasonal adjustment of some of their components.The RBA is still likely to raise official interest rates next week, economists predicted. (yeah, so what's new?)Commsec senior economist Craig James said the headline result was above than market expectations, albeit not substantially higher.The good news was that the annual growth rate of CPI inflation was within the RBA's two to three per cent target band, he said."If there is any risk, it is that it could end up bottoming out right at the top end of the band or slightly above, so I think on balance the Reserve Bank will increase interest rates in February," he said.But a rise in the cash interest rate after the bank's board meeting, to be held next Tuesday, was by no means certain."The Reserve Bank will be using a lot of strategy in terms of looking at interest rates over the next few months," he said.
"It may decide to wait in February and look at a bit more evidence on the economy." (yes! please do that. allow people a breathing space, recovery is slow and uncertain. don't blow it for Australia's economy, RB)Interest rates in Australia remain well below long term averages.
Mr James said the high point for the cash rate, currently at 3.75 per cent, in 2010 would probably be somewhere between 4.75 and 5.00 per cent."I don't think that's under threat, but clearly there's a lot of things the Reserve Bank has got to juggle in its own mind - things like the special stimulus being applied from tax breaks, the [federal] government's assistance payments and what the cessation of those measures is likely to do to the economy," he said. (yes! they need to look at how the tax breaks have eased the situation and how an increase in rates will make things so much more difficult)"I don't think the (latest result) is going to stop the Reserve Bank lifting rates up to more normal levels."He said inflation at this stage looked "reasonably controlled," but could creep higher if the economy picked up steam amid strong employment growth.The trajectory of rate increases throughout the year was still "an open question," he said.ICAP senior economist Adam Carr said he could not see how the RBA could pause on raising interest rates at its next board meeting on February 2."We are not looking at a subdued inflation backdrop," he said."We're looking at a situation where although core inflation is moderating, it's not really going down fast at all."It's grinding lower and going into what could be a very strong recovery."It's very dangerous to have core inflation well and truly above the target, or even at the top end of the target, so for a forward-looking central bank with an existing stimulatory policy setting I think they will be compelled to hike by 25 basis points."Mr Carr said the prospect of an interest rate pause by the central bank in March was "questionable"."There's no automatic resting point for the RBA."I think that's a misunderstanding by people in the market."He said the underlying inflation figure was the main driver for the RBA to lift interest rates next monthMr Carr predicted inflation would not fall much below three per cent by the end of the year."I think we will be at three per cent by the end of the year, notwithstanding RBA rate hikes."He forecast the RBA would lift interest rates by 100 basis points by the end of 2010. staff
Thursday, January 28, 2010
Wednesday, January 20, 2010
'Mingles' and investment properties
What is a 'mingle'? Glad you asked. A mingle is the middle-aged single person from the baby-boomer generation as a social group which is becoming a force to be reckoned with in our property markets. So yuppies and dinks, make way for the "mingles" because here we come!
Mingles are single, independent and know what we want and probably have pets.
So what does this mean for the property investor? This means an increasing demand for smaller houses, units and pet-friendly apartments. While more 45 to 59 year olds are choosing this life style, some mingles do not live alone by choice but by divorce or the death of a partner.
Taken from Michael Yardleys article:
In 1976 the number of Australians in this age group who were single was 381,000," Salt says. "These mingles broke down into three more or less equal categories -- the widowed, the separated and divorced and the never married. The latter group would have contained most of the gay community in this age group at that time."Over the quarter of a century to 2001, the mingles managed to multiply to 834,000. In an era when the middle-aged population has increased by 66 per cent, those ensconced in singledom soared by 119 per cent."But some categories have multiplied faster than others.While the number of middle-aged widows of both genders shrank, the never-marrieds expanded. And the separated and divorced rocketed up in numbers by nearly 400 per cent to over 500,000.These half a million extra mingles underpin a huge demand for housing, so as a property investor it is interesting to understand the type of property that would attract these them.Unlike the young singles who are more likely to live in an inner city or near city high rise apartment, the mingles are more likely to prefer a smaller dwelling or a unit in the middle suburbs.
Remember these single baby boomers are not hermits. Many have a relationship, but they just don't want to live with another person. Particularly if they are recently divorced. Instead they prefer living with animals who require less emotional and physical “maintenance.”
Mingles are single, independent and know what we want and probably have pets.
So what does this mean for the property investor? This means an increasing demand for smaller houses, units and pet-friendly apartments. While more 45 to 59 year olds are choosing this life style, some mingles do not live alone by choice but by divorce or the death of a partner.
Taken from Michael Yardleys article:
In 1976 the number of Australians in this age group who were single was 381,000," Salt says. "These mingles broke down into three more or less equal categories -- the widowed, the separated and divorced and the never married. The latter group would have contained most of the gay community in this age group at that time."Over the quarter of a century to 2001, the mingles managed to multiply to 834,000. In an era when the middle-aged population has increased by 66 per cent, those ensconced in singledom soared by 119 per cent."But some categories have multiplied faster than others.While the number of middle-aged widows of both genders shrank, the never-marrieds expanded. And the separated and divorced rocketed up in numbers by nearly 400 per cent to over 500,000.These half a million extra mingles underpin a huge demand for housing, so as a property investor it is interesting to understand the type of property that would attract these them.Unlike the young singles who are more likely to live in an inner city or near city high rise apartment, the mingles are more likely to prefer a smaller dwelling or a unit in the middle suburbs.
Remember these single baby boomers are not hermits. Many have a relationship, but they just don't want to live with another person. Particularly if they are recently divorced. Instead they prefer living with animals who require less emotional and physical “maintenance.”
Sunday, January 10, 2010
What will 2010 bring?
here's a start:
“The global 2009 stimulus money is going to start drying up. When that happens, we are going to see another economic collapse,the Crash of 2010.” - Gerald Celente, Editor, Trends Journal
ponder them thar words....
“The global 2009 stimulus money is going to start drying up. When that happens, we are going to see another economic collapse,the Crash of 2010.” - Gerald Celente, Editor, Trends Journal
ponder them thar words....
2010
A new year and a new post.
2010 will be a year the world economy remembers because that which the governments have glued together with rebates and infrastructure work will now be running out of steam and cash and the fall that was averted before by these gimmics will now happen.
So, hold onto your hats and mittens kids, we are in for a unique ride and opportunities to buy properties at greatly reduced prices, if you are cashed up that is.
2010 will be a year the world economy remembers because that which the governments have glued together with rebates and infrastructure work will now be running out of steam and cash and the fall that was averted before by these gimmics will now happen.
So, hold onto your hats and mittens kids, we are in for a unique ride and opportunities to buy properties at greatly reduced prices, if you are cashed up that is.
Sunday, December 27, 2009
Aussies living beyond our means
Aussies are $1.2 trillion in debt ! Wow!
In a new record, Australians now owe more in household debt than the country's entire economy earns in a year. Reserve Bank figures show mortgage, credit card and personal loan debts now stand at $1.2 trillion, up 71 per cent from just five years ago and equating to $56,000 for every man, woman and child in the country.Our spending binge, fuelled most recently by the federal government's First Home Owner Grant, means personal debt now totals 100.4 per cent of Australia's annual GDP - one of the highest ratios in the developed world. "It's the first time household debt has cracked 100 per cent of annual GDP and it's a terrible, terrible sign," University of NSW economics professor Steve Keen told News Ltd. "It shows we are living beyond our means and many highly geared borrowers are now extremely vulnerable to further rate rises - they are already saturated with debt and will not be able to tolerate much of an increase to their repayments." Australia's financial headache is likely to get worse before it gets better. The country is in the midst of the peak spending season, when billions goes on the plastic, yet the Reserve Bank data dates back to October's debt levels only, so that means there are another two months of First Home Owner Grant-fuelled mortgage activity still to be taken into account. The extra cost is expected to add billions to the burgeoning debt tally.
In a new record, Australians now owe more in household debt than the country's entire economy earns in a year. Reserve Bank figures show mortgage, credit card and personal loan debts now stand at $1.2 trillion, up 71 per cent from just five years ago and equating to $56,000 for every man, woman and child in the country.Our spending binge, fuelled most recently by the federal government's First Home Owner Grant, means personal debt now totals 100.4 per cent of Australia's annual GDP - one of the highest ratios in the developed world. "It's the first time household debt has cracked 100 per cent of annual GDP and it's a terrible, terrible sign," University of NSW economics professor Steve Keen told News Ltd. "It shows we are living beyond our means and many highly geared borrowers are now extremely vulnerable to further rate rises - they are already saturated with debt and will not be able to tolerate much of an increase to their repayments." Australia's financial headache is likely to get worse before it gets better. The country is in the midst of the peak spending season, when billions goes on the plastic, yet the Reserve Bank data dates back to October's debt levels only, so that means there are another two months of First Home Owner Grant-fuelled mortgage activity still to be taken into account. The extra cost is expected to add billions to the burgeoning debt tally.
2010 forcast
As prospective home buyers look for the best time to jump into the market, many of the nation’s top housing analysts have forecast modest residential price growth of about 5 or 6 per cent in 2010. Some of Australia’s leading economists believe demand for homes will stay strong as investors and upgraders pick up the slack from first home buyers. But a small group of doomsayers is convinced a combination of rising interest rates, the winding up of the first home owners grant boost and over-inflated prices could lay the foundations for a crash.
Happily, the nation is emerging from the global financial crisis with strong population growth, the lowest interest rates in decades and a rosier jobs outlook. Most economists, industry heads and real estate agents see the sun continuing to shine on residential property next year. BIS Shrapnel senior project manager of residential property Angie Zigomanis predicts steady growth of about five to six per cent in established residential property next year. ‘‘I’d expect you’d see steady low-to-mid single digit growth next year,’’ Mr Zigomanis said. ‘‘Over the next two or three years I think you’ll find interest rates will keep slowly edging upwards and it’ll keep a lid on the massive double digit price growth we were seeing previously.’’ Annual established house prices in Australia grew 6.2 per cent to September 2009, the latest Australian Bureau of Statistics data show. ‘‘If you look at most markets, prices declined last year and while people are talking about booms and everything else, most of what it did was really put prices back to where they were 12 to 18 months ago,’’ Mr Zigomanis said. First home buyers would not be excluded from the market until the Reserve Bank of Australia (RBA) raised interest rates by another 1 or 2 per cent, he said. Investor demand and upgrader’s demand picked up in the last few months of 2009 and would continue well into next year. As city rents increased due to low vacancy rates, more first home buyers in the 25 to 35 year age group would be encouraged into the market. Housing Industry Association chief economist Harley Dale said Australia would experience significant 20 to 25 per cent growth in new housing stock through to mid 2011. He also supports predictions of about five to six per cent growth in established home next year.‘‘With prices, we’ll probably continue to get a little bit more growth over the next six to 12 months but probably not at the rate that we’ve seen over the last six months which has been driven a lot by the first home-owner base,’’ he said. Mum and dad investors, who tended to look at the same type of investment housing stock as first home buyers, were beginning to step in to fill the gap. A shortage of housing, low interest rates and the first home buyer’s grant had helped support prices, he said.But University of Western Sydney Associate Professor of economics and finance Steve Keen said the rates and grants combination had already helped cause a housing boom in 2009.‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said. The implications would be ‘‘substantially negative’’ for all properties, not just those valued under $500,000.‘‘I’d expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008.’’ Meanwhile Commonwealth Bank economist James McIntyre cites wages growth as a key part of the equation, while predicting significant skills shortages emerging within 12 to 18 months.He said house prices would grow in the ‘‘mid single digits’’ next year, but those increases depended on how the build up of wages translated to other sectors of the economy. ‘‘If the whole economy catches fire with a strong growth in wages, then that will really be supportive of a continued strong growth in house prices.’’ He dismissed suggestions the Reserve Bank of Australia (RBA) had waited too long to increase interest rates and said there was a very low chance of house prices falling. It would take a ‘‘significant global shock’’ and an unprecedented surge in building approvals of between 200,000 and 250,000 homes to see significant weakness in house prices, he said. Ray White Real Estate chairman Brian White believes Australia has avoided a dramatic downturn in house prices. ‘‘All of us seem to have forgotten the anguish of the first four or five months of the year and we’re trying to understand just how on earth the year finished so strongly,’’ Mr White, who heads the nation’s largest group of real estate agencies, said. He also forecast growth of about 5 per cent in 2010 and said it had become a vendor’s market. ‘‘Now we’re going into the new year with a number of interest rate increases occurring but with quite strong growth.’’
Happily, the nation is emerging from the global financial crisis with strong population growth, the lowest interest rates in decades and a rosier jobs outlook. Most economists, industry heads and real estate agents see the sun continuing to shine on residential property next year. BIS Shrapnel senior project manager of residential property Angie Zigomanis predicts steady growth of about five to six per cent in established residential property next year. ‘‘I’d expect you’d see steady low-to-mid single digit growth next year,’’ Mr Zigomanis said. ‘‘Over the next two or three years I think you’ll find interest rates will keep slowly edging upwards and it’ll keep a lid on the massive double digit price growth we were seeing previously.’’ Annual established house prices in Australia grew 6.2 per cent to September 2009, the latest Australian Bureau of Statistics data show. ‘‘If you look at most markets, prices declined last year and while people are talking about booms and everything else, most of what it did was really put prices back to where they were 12 to 18 months ago,’’ Mr Zigomanis said. First home buyers would not be excluded from the market until the Reserve Bank of Australia (RBA) raised interest rates by another 1 or 2 per cent, he said. Investor demand and upgrader’s demand picked up in the last few months of 2009 and would continue well into next year. As city rents increased due to low vacancy rates, more first home buyers in the 25 to 35 year age group would be encouraged into the market. Housing Industry Association chief economist Harley Dale said Australia would experience significant 20 to 25 per cent growth in new housing stock through to mid 2011. He also supports predictions of about five to six per cent growth in established home next year.‘‘With prices, we’ll probably continue to get a little bit more growth over the next six to 12 months but probably not at the rate that we’ve seen over the last six months which has been driven a lot by the first home-owner base,’’ he said. Mum and dad investors, who tended to look at the same type of investment housing stock as first home buyers, were beginning to step in to fill the gap. A shortage of housing, low interest rates and the first home buyer’s grant had helped support prices, he said.But University of Western Sydney Associate Professor of economics and finance Steve Keen said the rates and grants combination had already helped cause a housing boom in 2009.‘‘The fact that rates are rising as we enter 2010, combined with the ending of the boost and the winding back of government stimulus packages, means that rising interest rates are likely to end the (housing) bubble that began in 2009,’’ Mr Keen said. The implications would be ‘‘substantially negative’’ for all properties, not just those valued under $500,000.‘‘I’d expect a five per cent or so fall (in residential house prices), probably returning to somewhere between the current peak and the previous one in September 2008.’’ Meanwhile Commonwealth Bank economist James McIntyre cites wages growth as a key part of the equation, while predicting significant skills shortages emerging within 12 to 18 months.He said house prices would grow in the ‘‘mid single digits’’ next year, but those increases depended on how the build up of wages translated to other sectors of the economy. ‘‘If the whole economy catches fire with a strong growth in wages, then that will really be supportive of a continued strong growth in house prices.’’ He dismissed suggestions the Reserve Bank of Australia (RBA) had waited too long to increase interest rates and said there was a very low chance of house prices falling. It would take a ‘‘significant global shock’’ and an unprecedented surge in building approvals of between 200,000 and 250,000 homes to see significant weakness in house prices, he said. Ray White Real Estate chairman Brian White believes Australia has avoided a dramatic downturn in house prices. ‘‘All of us seem to have forgotten the anguish of the first four or five months of the year and we’re trying to understand just how on earth the year finished so strongly,’’ Mr White, who heads the nation’s largest group of real estate agencies, said. He also forecast growth of about 5 per cent in 2010 and said it had become a vendor’s market. ‘‘Now we’re going into the new year with a number of interest rate increases occurring but with quite strong growth.’’
Wednesday, December 2, 2009
Rents increase
SYDNEY rents are set to climb more than 21 per cent over the next three years, the forecasting group BIS Shrapnel says. It suggests that after rising 6.2 per cent this year, Sydney rents will increase by 7.1 per cent a year for the next three years.
The tightening rental market will cause the vacancy rate to drop below 1 per cent, then remain very low in 2011, BIS Shrapnel predicted. The envisaged rent rises were an outcome of medium- and high-density dwelling construction starts plunging 28 per cent in 2009, reaching their lowest level since 1987. ''Housing supply is set to fall due to the low pipeline of new apartments,'' Jason Anderson, an economist at BIS Shrapnel, said. "While supply (of new apartments)has plunged, demand remains very strong.'' The net addition to the population from migration in 2008/09 is estimated at about 300,000, a record high, Mr Anderson said. Tighter lending restrictions on development projects following the global financial crisis had also contributed to the decline in supply. ''It is uncertain as to how long it will be before lending restrictions are eased and, even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said. The rush to buy a first home was another factor adding to the pressure on rental markets. "A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said. The long-term rental growth in Sydney between 2002 and 2008 was 3.5 per cent. The latest official data from the NSW Department of Housing indicated rents rose 3.9 per cent in the year to September. This reflected a $395 weekly median for two-bedroom rentals across Sydney. Rental growth was highest in the outer suburbs, with a 6.9 per cent annual increase to $310 a week. It was up 4.2 per cent to $375 a week in middle-ring municipalities and up 2.2 per cent to $500 in the pricier inner ring suburbs. The estate agent John McGrath said he expected rents would increase next year by between 5 and 10 per cent due to continuing short supply. He said yields would be maintained around current levels. Yields had dropped slightly from an average 5.3 per cent for apartments to 5.1 per cent, he said, and house rental yields had dropped from 4.4 per cent to 4.3 per cent.
adendum
Renters Becoming Latest Victims as Foreclosure Crisis Widens - (Washington Post - November 23, 2009)A new wave of foreclosures stands to hurt people who may have never taken out a mortgage: renters. In cities such as New York, Chicago and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are watching their homes fall apart along with the financing. The impact on tenants is uneven. New York City officials say the owners of the vast majority of buildings in foreclosure there are likely to maintain decent standards of living. Yet, of the 200 properties on the city housing agency's 2008 list of buildings with the worst maintenance problems, at least 77 had been in foreclosure. In buildings where a landlord is struggling to make loan payments, maintenance is often the first thing to go. Garbage can pile up, lists of overdue repairs get longer, and vermin multiply. http://www.washingtonpost.com/wp-dyn/content/article/2009/11/22/AR2009112200927.html
The tightening rental market will cause the vacancy rate to drop below 1 per cent, then remain very low in 2011, BIS Shrapnel predicted. The envisaged rent rises were an outcome of medium- and high-density dwelling construction starts plunging 28 per cent in 2009, reaching their lowest level since 1987. ''Housing supply is set to fall due to the low pipeline of new apartments,'' Jason Anderson, an economist at BIS Shrapnel, said. "While supply (of new apartments)has plunged, demand remains very strong.'' The net addition to the population from migration in 2008/09 is estimated at about 300,000, a record high, Mr Anderson said. Tighter lending restrictions on development projects following the global financial crisis had also contributed to the decline in supply. ''It is uncertain as to how long it will be before lending restrictions are eased and, even if some improvement were to occur in the near future, it would be some time before supply improves as most projects take 12 to 18 months to complete,'' he said. The rush to buy a first home was another factor adding to the pressure on rental markets. "A first-home buyer moving out of the family home, and purchasing a former investment property, will have actually reduced the available rental stock," Mr Anderson said. The long-term rental growth in Sydney between 2002 and 2008 was 3.5 per cent. The latest official data from the NSW Department of Housing indicated rents rose 3.9 per cent in the year to September. This reflected a $395 weekly median for two-bedroom rentals across Sydney. Rental growth was highest in the outer suburbs, with a 6.9 per cent annual increase to $310 a week. It was up 4.2 per cent to $375 a week in middle-ring municipalities and up 2.2 per cent to $500 in the pricier inner ring suburbs. The estate agent John McGrath said he expected rents would increase next year by between 5 and 10 per cent due to continuing short supply. He said yields would be maintained around current levels. Yields had dropped slightly from an average 5.3 per cent for apartments to 5.1 per cent, he said, and house rental yields had dropped from 4.4 per cent to 4.3 per cent.
adendum
Renters Becoming Latest Victims as Foreclosure Crisis Widens - (Washington Post - November 23, 2009)A new wave of foreclosures stands to hurt people who may have never taken out a mortgage: renters. In cities such as New York, Chicago and Los Angeles, where many investors are carrying upside-down mortgages on large rental buildings, some tenants are watching their homes fall apart along with the financing. The impact on tenants is uneven. New York City officials say the owners of the vast majority of buildings in foreclosure there are likely to maintain decent standards of living. Yet, of the 200 properties on the city housing agency's 2008 list of buildings with the worst maintenance problems, at least 77 had been in foreclosure. In buildings where a landlord is struggling to make loan payments, maintenance is often the first thing to go. Garbage can pile up, lists of overdue repairs get longer, and vermin multiply. http://www.washingtonpost.com/wp-dyn/content/article/2009/11/22/AR2009112200927.html
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