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Australia interest rates to go lower, for longer
Topic Started: 5 Aug 2013, 07:13 PM (9,986 Views)
mel
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Poontang
6 Aug 2013, 12:18 AM
I chose April as that would be inclusive of 1st Quarter results of 2014. Q1 I think qualifies as early in a year.
I thought febuary would be fair and reasonable since it represents the middle ground?

"I think the RBA rate won't matter soon and fixed loan rates will probably start to rise towards year end or into the new year."

if theres no negotiation i will reluctantly take april because you are a nice bloke though :D
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miw
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genX
6 Aug 2013, 09:30 AM
Let's agree that the > 1.2M market operates on it's own set of economic drivers.
Agreed.

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For the tiers below that, price rises are a bottom up effect. Investors buy almost exclusively in the bottom 2 tiers of the market.


Agreed, except I am not so sure that the prices of the tiers where investors are not represented are all that affected by investor activity. They really are separate markets. HOWEVER, in some suburbs of BNE I have noticed that properties that I would never have considered previously dropped so much after 2011 that their rental returns became very good. So tier 3 can become tier 2 and have its price supported on the way down by investors.

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As they are 20% of the market, in the bottom 2 tiers, they are 40% of the market.


I would go a bit further to say that there is a class of property where investors are nearly 100% of the market. For example, 1-bathroom apartments in Brisbane attract very little serious attention from anyone but investors (and smart FHBs I guess). The price of these apartments is pretty-much set by the achievable rental.

Quote:
 
If they are bidding prices up in those 2 tiers, they are driving the market, as upgraders FROM those 2 tiers sell higher and bid up prices in the next tier up. As I said earlier, this investor led boom can continue until investors are either debt saturated, or in Australia the land tax makes the cost of carry too high.


This can happen *up to a point*, and really only in the top-end of the rentals stock market. When gross yields drop below a certain point, investors have no business case to buy any more.

At any rate, we'll probably see if I am right or not fairly soon. I am expecting investment transactions to drop right off as a percentage of total as the market picks up, FHBs return to the market and the bargains disappear. My standard search is turning up hardly any prospects already in the suburbs I watch. Not that I am looking to buy at the moment.

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Of course, rising interest rates will have the opposite effect, but we live in ZIRP world now, wealth is created in the central bank, or at least the appearance of it anyway.


I guess I am in a minority here, but I can see interest rates rising quite suddenly and sharply in the next 18 months to 2 years.
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--Gloria Steinem
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newjez
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miw
6 Aug 2013, 05:38 PM


I guess I am in a minority here, but I can see interest rates rising quite suddenly and sharply in the next 18 months to 2 years.
No - it has been discussed many times in the popular press. The problem as I see it is that no one really knows what will happen when they start to unwind QE. All extremes have been put forward. High interest rates are one possibility. This would spell pain for many FHB's across the world. But equally, it might not happen. Good time to retire though. You'd get a nice annuity.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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b_b
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newjez
6 Aug 2013, 06:02 PM
miw
6 Aug 2013, 05:38 PM


I guess I am in a minority here, but I can see interest rates rising quite suddenly and sharply in the next 18 months to 2 years.
No - it has been discussed many times in the popular press. The problem as I see it is that no one really knows what will happen when they start to unwind QE. All extremes have been put forward. High interest rates are one possibility. This would spell pain for many FHB's across the world. But equally, it might not happen. Good time to retire though. You'd get a nice annuity.
The un-winding (or increasing) of QE has zero to do with Aussie interest rates.

Unwinding QE has very little to do with US interest rates except it may signal a move toward lifting the cash rate at some point in the future. Although Benanke has been at pains to highlight the end of QE doe not mean a near term lift in cash rates.
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newjez
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b_b
6 Aug 2013, 06:12 PM
The un-winding (or increasing) of QE has zero to do with Aussie interest rates.

Unwinding QE has very little to do with US interest rates except it may signal a move toward lifting the cash rate at some point in the future. Although Benanke has been at pains to highlight the end of QE doe not mean a near term lift in cash rates.
You really think there will be no effect on the Australian economy? Just discussing the possibility nearly cause a global stock market correction? Seriously b_b?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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b_b
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newjez
6 Aug 2013, 06:16 PM
b_b
6 Aug 2013, 06:12 PM
The un-winding (or increasing) of QE has zero to do with Aussie interest rates.

Unwinding QE has very little to do with US interest rates except it may signal a move toward lifting the cash rate at some point in the future. Although Benanke has been at pains to highlight the end of QE doe not mean a near term lift in cash rates.
You really think there will be no effect on the Australian economy? Just discussing the possibility nearly cause a global stock market correction? Seriously b_b?
Asset prices move up and down all of the time.

Do you want to talk about the real economy? Ok then. Simple question

What on earth does filling the reserve accounts of the US banks in US dollars (which is primarily used as a payment system for US customers) have to do with Australian interest rates?

Edit: An when you answer the question remember we do not get Australian dollars from overseas. There is no-one in China sitting on a big bag of Australian dollars. There is no-one in New York with a draw full of Australian dollars.
Edited by b_b, 6 Aug 2013, 06:31 PM.
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Count du Monet
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You can't buy oil at the ME pumps with AUD, you need USD.
The next trick of our glorious banks will be to charge us a fee for using net bank!!!
You are no longer customer, you are property!!!

Don't be SAUCY with me Bernaisse
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miw
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b_b
6 Aug 2013, 06:12 PM
The un-winding (or increasing) of QE has zero to do with Aussie interest rates.

Unwinding QE has very little to do with US interest rates except it may signal a move toward lifting the cash rate at some point in the future. Although Benanke has been at pains to highlight the end of QE doe not mean a near term lift in cash rates.
Well, taper talk certainly seems to have pushed the US 10-yr treasury yields up a bit, which has had a flow-on effect to their fixed-rate mortgages.

But I am not looking to the effects of QE ending to be the driver of higher cash rates in oz. At least not directly.
The truth will set you free. But first, it will piss you off.
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newjez
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miw
6 Aug 2013, 06:50 PM
Well, taper talk certainly seems to have pushed the US 10-yr treasury yields up a bit, which has had a flow-on effect to their fixed-rate mortgages.

But I am not looking to the effects of QE ending to be the driver of higher cash rates in oz. At least not directly.
What do you think will be the driver then?

and b_b - have you ever played jenga?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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b_b
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Count du Monet
6 Aug 2013, 06:48 PM
You can't buy oil at the ME pumps with AUD, you need USD.
You payin whatever currency the vendor required (which may be usd). Given the aud floats, I can aquire any major currency I need.
newjez
6 Aug 2013, 06:54 PM
What do you think will be the driver then?

and b_b - have you ever played jenga?
I'm wondering how you think the quantum of payment reserves in another country affect the Australian economy and Aussie interest rates.
Edited by b_b, 6 Aug 2013, 07:02 PM.
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