Market Round Up – December 2016

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Trump effect could have an impact on Australian interest rates

December saw the Reserve Bank hold interest rates at the 1.5% rate for at least another month but thanks to the results of the U.S. Presidential elections many are tipping that mortgage interest rates will be on the move upwards soon, regardless of any decisions being made by the Reserve Bank of Australia.

Trumps election has seen interest rates begin to move in the U.S. with the Federal Reserve increasing their benchmark interest rate for only the second time since 2008. With predictions that there may be another 3 or 4 U.S. rate rises in 2017, it seems the cost of money will become higher for most Americans. With many Australian banks dependent on the international money markets for much of their funding it only seems a matter of time before mortgage and other borrowing rates begin to rise in this country as lenders find the cost of international borrowing beginning to increase.

Banks face government pressures from two sides

The banks are increasingly feeling pressure from the government in two contrasting areas. Their every rate move is watched by politicians’ intent on not getting flak from the voting public about excessive bank profiteering, however at the same time they are also being squeezed by political pressure to maintain a higher percentage of equity and make their balance sheets more conservative. With the extra funds being tied down they are being forced to look at increasing their margins to keep shareholders happy. This will see increasing pressure on interest rates as they look to increase the profit on every dollar they borrow.

Sydney and Melbourne Growth Predictions

A recent News Corp article is predicting continued price growth in Sydney as the city moves towards its long term future of becoming a mega city. With new dwelling approvals now double the level experienced in 2004 there doesn’t seem to be any decline in market demand in the foreseeable future.

By contrast, as we discussed last month, Melbourne is expected to have an over-supply of property during 2017 by around 20,000 properties, with the apartment market showing signs of a glut, at least in the short term. Prices are still predicted to rise by 5% however and Melbourne still holds the crown as Australia’s fastest growing city, with an over 2% annual increase in population. This represents around 70,000 additional people per year and with an average occupancy of 2.6 people per house in Australia it would seem only a matter of months before any oversupply is absorbed by the market.

Gold Coast Looks to Lead 2017 Property Prices

The predicted winner for price growth in 2017 is expected to be the Gold Coast, which has seen a very static market since the Global Financial Crisis back in 2008. Agents in the city are already experiencing a severe shortage of stock in some suburbs with many properties selling almost as soon as they are listed, sometime sight unseen, as multiple buyers swoop.

The increased confidence has come on the back of the Commonwealth Games development, and new apartment projects in the Surfers and Broadbeach areas. There has been a significant investment in infrastructure and roading, with Stage 2 of the light rail project on track to connect the new Gold Coast hospital with the main rail system at Helensvale in the coming months.

Summary

With rate increases appearing likely in 2017 now represents an ideal time to refinance and lock in fixed interest rates deals while the rates on these are still at record lows. Talk to Ethan today to discuss the best financing options that can meet your needs.

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