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Be wary about using low interest rates as the catalyst for buying more properties - RBA; Heavily-indebted investors need to be mindful of a slowdown in house price growth
Topic Started: 22 Oct 2014, 08:52 PM (2,220 Views)
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RBA warns investors: be wary of low rates

October 21, 2014
Stephen Johnson

The Reserve Bank is warning investors to be wary about using low interest rates as the catalyst for buying more properties.

Financial regulators are discussing a possible tightening of rules for investors seeking funds, amid concerns about an "unbalanced" market.

Investors make up 45 per cent of total loan approvals, with these borrowers mainly snapping up existing properties.

That has helped fuel strong growth in capital city house prices, most notably in Sydney.

RBA deputy governor Philip Lowe says potential changes to lending rules to manage increasing housing market risk will not be heavy handed.

But he says heavily-indebted investors need to be mindful of a slowdown in house price growth when interest rates rose again.

"You need to think about the risks involved in this investment strategy," he told a business conference in Sydney.

"In an environment of low interest rates, one needs to ask the question of whether those low interest rates will be there indefinitely."

Dr Lowe said a sharp increase in investors buying property had increased overall risk in the property market.

Read more: http://news.smh.com.au/breaking-news-business/rba-warns-investors-be-wary-of-low-rates-20141021-3ikee.html
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Allan Grando Cazzo
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I don't know if rates are going up in the near term though.

We hear a lot of jaw boning, but which country has raised their cash rate recently?
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Investor888
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Allan Grando Cazzo
22 Oct 2014, 10:37 PM
I don't know if rates are going up in the near term though.

We hear a lot of jaw boning, but which country has raised their cash rate recently?
New Zealand have raised their cash rate recently (4 times this year). NZ Cash Rate
Jan 2014 was 2.5%
Mar 2014 0.25% rise to 2.75%
Apr 2014 0.25% rise to 3.00%
Jun 2014 0.25% rise to 3.25%
Jul 2014 0.25% rise to 3.50%

Australia I think will start raising rates mid 2015.

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Blondie girl
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Oh
It's safe as houses those IR.

Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Investor888
22 Oct 2014, 10:53 PM
New Zealand have raised their cash rate recently (4 times this year). NZ Cash Rate
Jan 2014 was 2.5%
Mar 2014 0.25% rise to 2.75%
Apr 2014 0.25% rise to 3.00%
Jun 2014 0.25% rise to 3.25%
Jul 2014 0.25% rise to 3.50%

Australia I think will start raising rates mid 2015.
Must be one of your more worthwhile posts imposter888

Keep up the good work .

Highlights a rather quick little runup, you would think a runup likethat would spook our market a bit.

But whats their jobs market and wages looking like now, what's their unemployment rate, are their rents dropping too, do they have all this overbuilding going on, have not been their since 2010.
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Kiwi
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Wowzers! Look at those rates climbing! Another .5% and they're near to doubled! What's that going to do to the monthly repayments. Mind you - good news for savers, as property takes a dip those with liquidity will be laughing because as property falls in value their cash is only ever on the increase!

Remember cash is and always will be king in a crisis...

While the greedy starve we shall have our feast!
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Glenn Stevens
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Investor888
22 Oct 2014, 10:53 PM
Australia I think will start raising rates mid 2015.
At this stage, we think that's unlikely due to a combination of factors. The end of the mining investment boom and the deterioration in the terms of trade mean that rates are likely to stay on hold for the foreseeable future. If anything, the Bank may be required to cut rates further as economic conditions deteriorate.
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Kiwi
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I want to hear more from Glenn!
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Blondie girl
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Kiwi
23 Oct 2014, 08:51 AM
Wowzers! Look at those rates climbing! Another .5% and they're near to doubled! What's that going to do to the monthly repayments. Mind you - good news for savers, as property takes a dip those with liquidity will be laughing because as property falls in value their cash is only ever on the increase!

Remember cash is and always will be king in a crisis...

While the greedy starve we shall have our feast!
It's a good idea to have some ca$h reserves for life's surprises..nothing wrong with that.

However, what about the self funded retirees? It would be soo crappy

if everyone were ca$h heavy in ones portfolio... Would what that do to the property market!!

It's their own fault if people decide to gamble on anything (property included) to take risks to win short term.



Oooohhh
What's this has "gleeny glen" arrived on this forum, this is so funny ...

Oh glenny..
What's your opinion on Gail Kelly's call ages ago when she mentioned her expectations that the huge house price increases between like 1996-2007 are a thing of the past .?

You know she sold her $1.73 mill house to purchase an $8.95 mil .. In 2012.

:lol



Edited by Blondie girl, 23 Oct 2014, 01:29 PM.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$
It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged
Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do.
Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
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Glenn Stevens
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Blondie girl
23 Oct 2014, 01:17 PM
Oh glenny..
What's your opinion on Gail Kelly's call ages ago when she mentioned her expectations that the huge house price increases between like 1996-2007 are a thing of the past .?

You know she sold her $1.73 mill house to purchase an $8.95 mil .. In 2012.
Hi Blondie. I'm optimistic that property investors can continue to enjoy strong house price appreciation into the future but I would have to agree, in a broad sense, with those comments that we won't see the standout performance of 1996 - 2007 repeated. It was down to a number of one-off structural adjustments during those years that dwelling prices rose so strongly, and again, those adjustments were one-off. The years ahead will no doubt challenge us in various ways, including in ways we cannot predict. But what's new about that? Even if the pessimists turn out to be right on one or more counts, it doesn't follow that we would be unable to cope. Acting sensibly, with a long-term focus, has as good a chance as ever of seeing us through whatever comes our way. We have much to live for. We want to do everything we can to ensure the next generation can share the positive outlook that most Australians have (almost) always had.

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