Don’t bet on low rates lasting long Chris Joye Link here
BEST GUESS My best guess, however, is that as the impact of the four easings we’ve had in the last year continues to work its way through the system, asset pricing will shift to recognising the likelihood that rates will have to be normalised. And contrary to some hype, current credit costs are not remotely near this new normal.
Stevens’s recent remarks on the possibility of applying macro-prudential tools to hedge against brewing bubbles were revealing in this context. While conceding they could be “a useful adjunct to other policy tools to help manage tensions”, Stevens chose to highlight that one cannot use these regulatory interventions “over a prolonged period to try to make up for the fact that the price of credit is not in the right place”.
This brings us back to the $4 trillion housing market, which is the cornerstone of consumer wealth and all bank balance sheets. One fascinating feature of its dynamics in December is that we have not observed the sharp seasonal slowdown one would ordinarily expect.
In the final month of the year, prices often slump and growth is typically one percentage point lower than trend. Yet auction clearance rates have held up unusually well and properties have continued to grind out capital gains.
Combined with a tsunami of speculative investment activity, and the untapped leveraged demand in the $500 billion self-managed super sector, this suggests that the current boom could have some way to run. It is easy to conceive of a situation where national house prices, which are already at all-time highs, climb 10 per cent over 2014 if the cost of borrowing stays at its current level. That would make Australian housing more expensive than it has ever been by June next year.
Everything seems to cycle. I will say i renewed a small term deposit yesterday the best rate i could get was 3.75% Rates had just fallen from 4%. For what it's worth. Peter :pop: If someone had $10,000,000 in the bank at 3.75% it would give them $375,000 per year income. Barely enough to live in Perth. Peter In fact,' said Mustapha Mond, 'you're claiming the right to be unhappy. Not to mention the right to grow old and ugly and impotent; the right to have syphilis and cancer, the right to have too little to eat; the right to be lousy; the right to live in constant apprehension of what may happen tomorrow; the right to catch typhoid; the right to be tortured by unspeakable pains of every kind.' There was a long silence.
I claim them all,' said the Savage at last.
Mustapha Mond shrugged his shoulders. 'You're welcome,' he said.” ― Aldous Huxley, Brave New World
Mustapha Mond shrugged his shoulders. 'You're welcome,' he said.”
Now there's an image change for ya - From Fruitfly ta Musty Mons ...
You're messing with my head Mr Fraser - In one of your recent posts you suggest interest rates could stay low for decades (as I recall?); Now you reckon the Joy Boy says don't bet on it.
Now there's an image change for ya - From Fruitfly ta Musty Mons ...
You're messing with my head Mr Fraser - In one of your recent posts you suggest interest rates could stay low for decades (as I recall?); Now you reckon the Joy Boy says don't bet on it.
Blood in the streets if they don't No?
Yes herbie, I think that we will be in a low rate environment for some years.
This article was written by Chris Joye and he expects a rate rise in 2014 and so does the Kouk. The Kouk has had some good form lately with his house price rise call and so has CJ.
So at this point I'm going against two guys who I have a lot of respect for. A caveat - if the rates sneak up 0.25% and no more or later come down again I would still call that a low rate environment. Sorry if that's a bit vague.
Any expressed market opinion is my own and is not to be taken as financial advice
Yes herbie, I think that we will be in a low rate environment for some years.
This article was written by Chris Joye and he expects a rate rise in 2014 and so does the Kouk. The Kouk has had some good form lately with his house price rise call and so has CJ.
So at this point I'm going against two guys who I have a lot of respect for. A caveat - if the rates sneak up 0.25% and no more or later come down again I would still call that a low rate environment. Sorry if that's a bit vague.
The Joy Boy quite correctly identifies "the $4 trillion housing market" as being "the cornerstone of consumer wealth and all bank balance sheets" - So it's Too Big To Be Allowed To Fail - Very obviously.
So I agree with your 'best guess' - A low interest rate environment is our future - If at all possible.
Two side comments:
* Reckoned I was gunna get trashed from my job back in the middle of the year. Was (and remain) heavy in cash. Started snooping around blocks of units where I am, priced at about a mill or less. Plenty about. But there's eff all now.
* One of the few remaining ones I enquired about today has just gone under contract - Yet again! The agent said the banks refused ta pony up the loot for the previous contracts. Though with this one being a cash offer (subject ta building 'n pest only), he expects it will go through.
This country will probably end up having another recession we had to have and a house price crash.
We've got another PM who revels in being a dickhead just like Keating to oversee it.
IRs are absurdly low and need to go up by about 5%.
stinkbug omosessuale Frank Castle is a liar and a criminal. He will often deliberately take people out of context and use straw man arguments. Frank finally and unintentionally gives it up and admits he got where he is, primarily via dumb luck! See here Property will be 50-70% off by 2016.
I still beleive it will be the bond market rate forcing up MORTGAGE rates into the near future (central bank rates will probably remain fairly low)
An extension of the Transmutation mentioned on this forum. The rich getting richer and the middle/lower classes treading water or going backwards.
Private debt levels are very high and many will struggle as mortgage rates rise.
Probably a couple of years before real increases in bankrupt/default rates flow through data though. It is not going to happen overnight.
3 or so years for a number from a dart thrown at the dartboard..
House prices supposed to track incomes over time.... Well incomes are not going to have the same wage growth in the near term... All those volatile items that get removed from CPI calculations because they are, well too volatile will still be drags on discretionary income.
If foreign money is supporting house prices then that is not really good for the economy because it is giving a false sense of the economies position.
As I have said in another thread, I don't think we will have a wide spread property crash of 40% but I can see some areas of Melbourne's Northern and Western suburbs being significantly cheaper in a 3 to 5 year period (significant being 20% or more).
There are some people who seem angry and continuously look for conflict. Walk away, the battle they are fighting isn't with you, it's with themselves.
The first lesson of economics is scarcity: There is not enough of anything to satisfy all who want it. The first lesson of politics is to disregard the first lesson of economics. ~ Thomas Sowell.
Who was the fool, who the wise man, who the beggar or the Emperor? Whether rich or poor, all are equal in death.
The Joy Boy quite correctly identifies "the $4 trillion housing market" as being "the cornerstone of consumer wealth and all bank balance sheets" - So it's Too Big To Be Allowed To Fail - Very obviously.
So I agree with your 'best guess' - A low interest rate environment is our future - If at all possible.
Two side comments:
* Reckoned I was gunna get trashed from my job back in the middle of the year. Was (and remain) heavy in cash. Started snooping around blocks of units where I am, priced at about a mill or less. Plenty about. But there's eff all now.
* One of the few remaining ones I enquired about today has just gone under contract - Yet again! The agent said the banks refused ta pony up the loot for the previous contracts. Though with this one being a cash offer (subject ta building 'n pest only), he expects it will go through.
Buying and financing a block of units is different to buying 4 or 6 units individually. The banks look at the deal differently.
I could speculate but the deal might have been hit on the head for several different reasons. Banks are willing lenders at the moment, but they aren't writing anything that doesn't stack up well, especially with an exposure of around $1M all on one building.
Any expressed market opinion is my own and is not to be taken as financial advice
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