I posted this last week in the Economics forum and it was suggested I let you guys have a read:
This is the lead into an article about property and why the time is ripe to get back in.
"The Reserve Bank’s move to cut interest rates last week has already caused some commentators to predict a new price bubble. While it’s very early days, the property market is definitely poised for an upturn and investors should take a serious look at gearing into bricks and mortar."
Now when you consider that
our AUD should remain reasonably high until the mining infrastructure boom subsides next year. Lower interest rates will have an dampening effect but discounted against that is a depreciating USD
unemployment is on a rise
our terms of trade is rotating to belly up
negative growth is predicted for late next year/2014
the RBA is dropping rates to stimulate a deleveraging economy; an economy in trouble.
any mealy interest rate drop passed on by the banks will most likely go to reduction of mortgage to into spending stimulus
banks fighting for retail deposits as opposed to foreign Domestic funding will have increased costs for deposits. Interest rates on mortgages will not fall in line with RBA cuts
etc...
it is a puzzle why a reputable commentator would go against his co-commentators in this reputable and widely subscribed publication.
Yes, I understand that a cashed up investor could make ~5% gross on property rental return but over the horizon their lurks real trouble if you're looking for capital gain.
Wouldn't it be safer for that investor to put his money in the bank and get 5% nett and not worry about possible capital losses?
Low interest rates in the US can't be picked up by many households for refinancing as they have negative equity. Does Australia want this?
And wouldn't it be better for young Australian's not to get caught in a property poverty trap.
Pump priming our property market at this point in time by educated journalists boarders on near criminal recklessness.
We need a property boom now like a hole in the head.
