Freer Property and Finance

We anticipated that Interest rates would not rebound as quickly as many Australian commentators predicted (See August 2009 post), due to slower company earnings coming out of the worst recession since the Great Depression. Our position has been vindicated with the RBA undoing the cash rate increase from November 2010 the following Melbourne Cup day last year. This was followed by another cut in December and more a likely this year with the protracted debt issues in southern Europe and a struggling retail sector locally.

Given the ongoing weakness in the global economy and 'two speed' local economy, the RBA may need to review their preferred 2-3% inflation band and loosen monetary policy.

Every buyer of a new property can qualify to receive AUS$10,000 from the Queensland government just by signing a contract dated between 1st August and 31st January to buy a new property in Queensland. (conditions apply)

This $10,000 Queensland Building Boost Grant is for buyers of new homes whether investment or occupation by owners. Whereas $10k is a help, the real benefit will be in giving a much needed boost to a market recovering from bad weather events and lowered investor confidence. What is your view?

NSW state government Budget announcement: From July, buying a home off the plan for less than $600,000 incurs no stamp duty, a saving of up to $22,500. This doubles the 50 percent stamp duty cut on newly built houses worth up to $600,000 from July 1 2009 . Do you think this will be a vital second step in alleviating the chronic shortage of housing in the state or will it merely result in increased profit for developers?

Do you agree that Reserve Bank Governor Glenn Stevens has a dilemma -  if he continues raising interest rates in order to quell demand, the effect is to also delay delivery of new housing product? Developers are cautious about lodging building approvals when buyers are withdrawing from the market (assuming they can even obtain construction finance in the tighter credit environment). The nascent recovery in the Sydney building industry is threatened by a too hasty normalisation of cash rates combined with the withdrawal of government incentives, the net effect of which will be diminished supply and accelerated house price inflation.

With ANZ and Westpac predicting a near doubling of mortgage defaults over 2010, continuing strength in net migration gains and natural population increase the supply /demand disconnect is expected to persist. Many commentators anticipate a mini-sub prime in the sub $500k property space. Do you see opportunistic  investors rushing to fill the void with the withdrawal of FHB boost benefits?

Annualised, we are looking at around 12%pa growth in Australian property values. With the phasing out of the First Home Buyer Boost Australia is seeing an orderly transfer of demand from FHB's to investors. Do you believe that First Home Buyers have created a 'bubble' in the sub $500k pricepoint or do you feel that the current rate of growth is sustainable?

Interest rates may not rebound as quickly as many Australian commentators predict, due to slower company earnings coming out of the worst recession since the Great Depression.

Property investment is not without risk. Typically mistakes are made where investors are not clear on their financial objectives, inadequate research is undertaken or the services of prudent financial contacts and property professionals are not engaged .